International Banking and Cross-Border Effects of Regulation: Lessons from the United States

36 Pages Posted: 20 Sep 2016

See all articles by Jose M. Berrospide

Jose M. Berrospide

Board of Governors of the Federal Reserve System

Ricardo Correa

Board of Governors of the Federal Reserve System

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Friederike Niepmann

Board of Governors of the Federal Reserve System; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2016

Abstract

Domestic prudential regulation can have unintended effects across borders and may be less effective in an environment where banks operate globally. Using U.S. micro-banking data for the first quarter of 2000 through the third quarter of 2013, this study shows that some regulatory changes indeed spill over. First, a foreign country’s tightening of limits on loan-to-value ratios and local currency reserve requirements increase lending growth in the United States through the U.S. branches and subsidiaries of foreign banks. Second, a foreign tightening of capital requirements shifts lending by U.S. global banks away from the country where the tightening occurs to the United States and to other countries. Third, tighter U.S. capital regulation reduces lending by large U.S. global banks to foreign residents.

Suggested Citation

Berrospide, Jose M. and Correa, Ricardo and Goldberg, Linda S. and Niepmann, Friederike, International Banking and Cross-Border Effects of Regulation: Lessons from the United States (September 2016). NBER Working Paper No. w22645. Available at SSRN: https://ssrn.com/abstract=2840593

Jose M. Berrospide (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
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(202) 452-3590 (Phone)

Ricardo Correa

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

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New York, NY 10045
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212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

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Friederike Niepmann

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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