The International Transmission of Bank Capital Requirements: Evidence from the United Kingdom

Aiyar, Shekhar; Calomiris, Charles W.; Hooley, John; Korniyenko, Yevgeniya; Wieladek, Tomasz

doi:10.2139/ssrn.2428184

Cited by 11 publications

(8 citation statements)

References 18 publications

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“…In the EU, with few exceptions, reciprocation by other Member States is typically voluntary. 2 Therefore, LTV regulation and reciprocity is an important concern of policy makers, which is supported by the data. There is evidence of cross-border spillovers in many European countries.…”

Section: Lack Of Reciprocation May Open Up the Possibility Of Regulatory Arbitrage By Cross-border Banking Groupsmentioning

confidence: 53%

“…There is evidence of cross-border spillovers in many European countries. This issue is particularly important for the UK …nancial system as foreign banks constitute a large share 2 For instance, in December 2014, De Nederlandsche Bank (DNB) noti…ed its decision to reciprocate the measure on residential mortgage lending adopted by the Banque Nationale de Belgique (NBB) in December 2013. DNB decided to apply the same measure to mortgages on residential real estate issued through branches of Dutch banks located in Belgium.…”

Section: Lack Of Reciprocation May Open Up the Possibility Of Regulatory Arbitrage By Cross-border Banking Groupsmentioning

confidence: 99%

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Cross-country spillovers from macroprudential regulation: Reciprocity and leakage

Rubio

2020

Journal of International Money and Finance

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In a globally interconnected banking system, there can be spillovers from domestic macroprudential policies to foreign banks and vice versa, for example, through the presence of foreign branches in the domestic economy. The lack of reciprocity of some macroprudential instruments may result in an increase in bank ‡ows to those banks with lower regulatory levels, a phenomenon known as "leakage."This may decrease the e¤ectiveness of macroprudential policies in the pursuit of …nancial stability.To explore this topic, I consider a two-country DSGE model with housing and credit constraints.Borrowers can choose whether to borrow from domestic or foreign banks. Macroprudential policies are conducted at a national level and are represented by a countercyclical rule on the loan-to-value ratio.Results show that when there are some sort of reciprocity agreements on macroprudential policies across countries, …nancial stability and welfare gains are larger than in a situation of non reciprocity.An optimal policy analysis shows that, in order to enhance the e¤ectiveness of macroprudential policies, reciprocity mechanisms are desirable although the foreign macroprudential rule does not need to be as aggressive as the domestic one.

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Section: Lack Of Reciprocation May Open Up the Possibility Of Regulatory Arbitrage By Cross-border Banking Groupsmentioning

confidence: 53%

Section: Lack Of Reciprocation May Open Up the Possibility Of Regulatory Arbitrage By Cross-border Banking Groupsmentioning

confidence: 99%

Cross-country spillovers from macroprudential regulation: Reciprocity and leakage

Rubio

2020

Journal of International Money and Finance

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“…de Marco and Wieladek (2016) demonstrate the presence of interactions only for small banks. Aiyar et al (2014a) explore heterogeneities regarding the counterpart sector and find that banks would tend to cut back credit to other banks more than to firms and households, consistent with shorter maturity, wholesale lending which is easier to roll off.…”

Section: Literature Reviewmentioning

confidence: 94%

“…This effect might be due to local borrowers being able to resort to lending from abroad in order to compensate for the regulatory tightening constraining local banks. We then explore heterogeneities regarding counterpart sectors following Aiyar et al (2014a) who find that banks adjust their lending to other banks rather than to households and firms. Such decomposition would allow to characterize the underlying mechanism.…”

Section: Exploring Heterogeneitiesmentioning

confidence: 99%

A Prudential trade-off? Leakages and Interactions with Monetary Policy*

Meunier

Pedrono

2021

SSRN Journal

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While monetary and prudential policies are generally analysed separately, this paper focuses on how the two interact. Taking an international perspective, we show that monetary policy in a centre economy (Euro Area) spill over its borders through bank lending -therefore inducing volatility in cross-border lending flows. Investigating a sample of 30 advanced and emerging economies, we find evidence that prudential policy in the receiving-country interact with monetary policy so that a tighter prudential stance in the recipient-country mitigates the volatility of banking flows induced by monetary policy abroad. But we also show that a tighter prudential stance -interactions apartimplies a higher growth of cross-border lending. Taken together, these results might suggest a trade-off: while a tighter prudential stance reduces the volatility of cross-border lending flows, it also implies that local borrowers resort more to lending from abroad. Taking advantage of the granularity of our confidential dataset, we finally explore heterogeneities and show that such leakages arise only for financially more open economies and only through the financial sector, with evidence that such leakages are driven by intra-group lending.

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“…The largest set of studies evaluates the consequences of the capital regulation tightening for bank lending (e.g. Buch and Prieto 2014, Bridges et al 2014, Aiyar et al 2014, Mesonnier and Monks 2014, Fraisse et al 2020, Imbierowicz et al 2018. Yet regulatory reforms have also been shown to have unintended consequences.…”

Section: Contribution Of the Papermentioning

confidence: 99%

Banks’ complexity-risk nexus and the role of regulation

Martynova

Vogel

2022

Journal of Banking & Finance

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Research QuestionSince the global financial crisis of 2008/2009 the issue of bank complexity is perceived by regulators as a feature that impedes bank resolution and favours bank risk taking. Therefore, new regulations have been put in place to ensure that large and complex financial institutions worldwide become more resilient. Yet, despite its application in regulatory policy, the notion of bank complexity remains ambiguous, and its implications for bank risk are not yet well understood in the academic literature. In this paper, we answer the following questions. First, what is the relationship between bank complexity and bank risk? Second, how does the tightening of bank regulations affect bank complexity? Finally, how do the changes in bank complexity induced by regulatory reforms affect bank risk-taking? To determine banks' complexity we rely on measures capturing the organizational structures that stretch across geographical locations and business areas in bank holding companies. ContributionNichttechnische Zusammenfassung Fragestellung Seit der globalen Finanzkrise 2008/2009 sehen die Regulierungsbehörden die Komplexität von Banken als ein Problem an, welches die Abwicklung von Banken erschwert und gleichzeitig den Banken Anreize setzt, schwer zu überwachende Risiken einzugehen. Daher wurden neue Regulierungen eingeführt, um die Widerstandsfähigkeit großer und komplexer Finanzinstitutionen zu erhöhen. Die Implikationen von Komplexität für das Risiko von Banken wurden in der akademischen Literatur bislang nicht umfassend untersucht. In diesem Papier gehen wir den folgenden Fragen nach. Erstens, wie ist der Zusammenhang zwischen dem Risiko und der Komplexität von Banken? Zweitens, wie beeinflussen Verschärfungen regulatorischer Anforderungen die Komplexität von Banken? Drittens, wie passen Banken ihr Risikoverhalten an, wenn regulatorische Maßnahmen sich auf ihre Komplexität auswirken? Zur Bestimmung der Komplexität von Banken greifen wir auf Maße zurück, die die organisatorischen Strukturen erfassen, sowohl in geografischer Hinsicht als auch über Geschäftsfelder hinweg. Beitrag Dieses Papier leistet einen Beitrag zur bestehenden Literatur, indem es einen Einblick in die organisatorische Komplexität von Banken in Deutschland gibt, wobei wir den Zusammenhang zwischen der Komplexität und dem Risiko, d.h. den Komplexitäts-Risiko-Nexus für 84 große Banken über den Zeitraum 2005-2017 betrachten. Darüber hinaus untersuchen wir, wie sich Verschärfungen in der Bankenregulierung nach der globalen Finanzkrise auf diesen Nexus auswirken. ErgebnisseUnsere Ergebnisse zeigen, dass komplexere Banken ein höheres Risiko aufweisen, wobei dieser Zusammenhang über die Zeit jedoch schwächer wird. Auch finden wir, dass Banken ihre Komplexität als Reaktion auf verschärfte Regulierungen verringern. Dies gilt insbesondere für systemrelevante Banken (SIBs), die gleichzeitig ihre damit verbundenen regulatorischen Kosten stärker reduzieren als andere Banken. Darüber hinaus finden wir, dass SIBs ihre organisatorische und Einkommensdiver...

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The International Transmission of Bank Capital Requirements: Evidence from the United Kingdom

Cited by 11 publications

References 18 publications

Cross-country spillovers from macroprudential regulation: Reciprocity and leakage

Cross-country spillovers from macroprudential regulation: Reciprocity and leakage

A Prudential trade-off? Leakages and Interactions with Monetary Policy*

Banks’ complexity-risk nexus and the role of regulation

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