Abstract

http://ssrn.com/abstract=2165196
 


 



When the Cat's Away the Mice will Play: Does Regulation at Home Affect Bank Risk Taking Abroad?


Steven Ongena


University of Zurich - Department of Banking and Finance

Alexander A. Popov


European Central Bank (ECB)

Gregory F. Udell


Indiana University - Department of Finance

October 22, 2012

ECB Working Paper No. 1488

Abstract:     
This paper provides the first empirical evidence that bank regulation is associated with cross-border spillover effects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9613 firms in 1976 different localities across 16 countries. We find that lower barriers to entry, tighter restrictions on bank activities, and higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The effects are stronger when banks are less efficiently supervised at home, and are observed to exist independently from the impact of host-country regulation.

Number of Pages in PDF File: 64

Keywords: bank regulation, cross-border financial institutions, lending standards, financial risk

JEL Classification: G21, G28, G32

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Date posted: November 21, 2012  

Suggested Citation

Ongena, Steven and Popov, Alexander A. and Udell, Gregory F., When the Cat's Away the Mice will Play: Does Regulation at Home Affect Bank Risk Taking Abroad? (October 22, 2012). ECB Working Paper No. 1488. Available at SSRN: http://ssrn.com/abstract=2165196

Contact Information

Steven R. G. Ongena (Contact Author)
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
Alexander A. Popov
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
Gregory F. Udell
Indiana University - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
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