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On a tight leash: does bank organisational structure matter for macroprudential spillovers?

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On a tight leash : does bank organisational structure matter for macroprudential spillovers? / Danisewicz, Piotr; Reinhardt, Dennis; Sowerbutts, Rhiannon.

2014.

Research output: Working paper

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@techreport{b3c4b21ff4284922b2283cd6a9791693,
title = "On a tight leash: does bank organisational structure matter for macroprudential spillovers?",
abstract = "This paper examines whether cross-border spillovers of macroprudential regulation depend on the organisational structure of banks{\textquoteright} foreign affiliates. Our analysis compares the response of foreign banks{\textquoteright} branches versus subsidiaries to changes in macroprudential regulations in foreign banks{\textquoteright} 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{\textquoteright} 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.",
keywords = "Macroprudential regulation, cross-border lending, credit supply, foreign banks organizational structure",
author = "Piotr Danisewicz and Dennis Reinhardt and Rhiannon Sowerbutts",
year = "2014",
language = "English",
type = "WorkingPaper",

}

RIS

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 -