Submitted manuscript, 747 KB, PDF document
Research output: Working paper
Research output: Working paper
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TY - UNPB
T1 - On a tight leash
T2 - does bank organisational structure matter for macroprudential spillovers?
AU - Danisewicz, Piotr
AU - Reinhardt, Dennis
AU - Sowerbutts, Rhiannon
PY - 2014
Y1 - 2014
N2 - This paper examines whether cross-border spillovers of macroprudential regulation depend on the organisational structure of banks’ foreign affiliates. Our analysis compares the response of foreign banks’ branches versus subsidiaries to changes in macroprudential regulations in foreign banks’ home countries. By focusing on branches and subsidiaries of the same banking group, we are able to control for all the factors affecting parent banks’ decisions regarding the lending of their foreign affiliates. We document that there are important differences between the type of regulation and the type of lending. Following a tightening of capital regulation, branches of multinational banks reduce interbank lending growth in the UK by 6.3pp more relative to subsidiaries of the same banking group. Lending to non-bank borrowers does not exhibit such differences. A tightening in lending standards or reserve requirements at home does not have differential effects on both interbank and non-bank lending in the UK.
AB - This paper examines whether cross-border spillovers of macroprudential regulation depend on the organisational structure of banks’ foreign affiliates. Our analysis compares the response of foreign banks’ branches versus subsidiaries to changes in macroprudential regulations in foreign banks’ home countries. By focusing on branches and subsidiaries of the same banking group, we are able to control for all the factors affecting parent banks’ decisions regarding the lending of their foreign affiliates. We document that there are important differences between the type of regulation and the type of lending. Following a tightening of capital regulation, branches of multinational banks reduce interbank lending growth in the UK by 6.3pp more relative to subsidiaries of the same banking group. Lending to non-bank borrowers does not exhibit such differences. A tightening in lending standards or reserve requirements at home does not have differential effects on both interbank and non-bank lending in the UK.
KW - Macroprudential regulation
KW - cross-border lending
KW - credit supply
KW - foreign banks organizational structure
M3 - Working paper
BT - On a tight leash
ER -