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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Volume (Year): 64 (2009) Issue (Month): 3 (06) Pages: 1099-1142 Download reference. The following formats are available: HTML
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