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Level Playing Fields in International Financial Regulation

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  • ALAN D. MORRISON
  • LUCY WHITE
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    Abstract

    We analyze the desirability of level playing fields in international financial regulation. In general, level playing fields impose the standards of the weakest regulator upon the best-regulated economies. However, they may be desirable when capital is mobile because they counter a "cherry-picking" effect that lowers the size and efficiency of banks in weaker economies. Hence, while a "laissez faire" policy favors the better-regulated economy, level playing fields are good for weaker regulators. We show that multinational banking mitigates the cherry-picking effect, and reduces the damage that a level playing field causes in the better-regulated economy. Copyright (c) 2009 The American Finance Association.

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    Bibliographic Info

    Article provided by American Finance Association in its journal The Journal of Finance.

    Volume (Year): 64 (2009)
    Issue (Month): 3 (06)
    Pages: 1099-1142

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    Handle: RePEc:bla:jfinan:v:64:y:2009:i:3:p:1099-1142

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    Cited by:
    1. Buck, Florian & Schliephake, Eva, 2013. "The regulator’s trade-off: Bank supervision vs. minimum capital," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4584-4598.
    2. Florian Buck & Eva Schliephake, 2012. "The Regulator's Trade-off: Bank Supervision vs. Minimum Capital," CESifo Working Paper Series 3923, CESifo Group Munich.
    3. Ongena, Steven & Popov, Alexander & Udell, Gregory F., 2013. "“When the cat's away the mice will play”: Does regulation at home affect bank risk-taking abroad?," Journal of Financial Economics, Elsevier, vol. 108(3), pages 727-750.
    4. Thierry Tressel & Thierry Verdier, 2014. "Optimal Prudential Regulation of Banks and the Political Economy of Supervision," IMF Working Papers 14/90, International Monetary Fund.
    5. Morrison, Alan D. & White, Lucy, 2010. "Reputational contagion and optimal regulatory forbearance," Working Paper Series 1196, European Central Bank.
    6. Costas N. Kanellopoulos, 2012. "Employment and worker flows during the financial crisis," Economic Bulletin, Bank of Greece, Economic Research Department, issue 36, pages 31-41, April.
    7. Buck, Florian & Schliephake, Eva, 2012. "Political Economy of Banking Regulation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62018, Verein für Socialpolitik / German Economic Association.
    8. Morrison, Alan D. & White, Lucy, 2013. "Reputational contagion and optimal regulatory forbearance," Journal of Financial Economics, Elsevier, vol. 110(3), pages 642-658.

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