International Economics

<< N°172

  N°172  
Issue Q3 2022  
Prudential policy spillovers: How do international bank flows react to French policies?  
Stéphane Dées
Julio Ramos-Tallada
 
Most of prudential regulations apply to national institutions while, in practice, banks operate at the global level, generating international banking flows which are not comprehensively captured by policies with a domestic remit. This may give rise to spillovers, i.e., effects not considered ex ante in the objectives and/or constraints of authorities in charge of prudential policy, the effectiveness of which may be harmed. Using BIS data on foreign bank lending over a large sample of countries, we investigate international spillovers from French prudential policies. Overall, we show that French prudential policies entail a reduction in foreign banks' lending to French residents. Yet some measures may lead to undesired leakages that potentially undermine authorities' goals: foreign bank affiliates’ exposure to France rose by 1.1% (1.9 Bn USD) on average over 2011–17 owing to the implementation of Basel capital requirements.
Abstract

   
International banking ; Prudential regulation ; International spillovers ; Keywords
F30 ; G21 ; G28 ; JEL classification
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