IDEAS home Printed from https://ideas.repec.org/a/eee/intfin/v34y2015icp294-310.html
   My bibliography  Save this article

Cross-border banking claims on emerging countries: The Basel III Banking Reforms in a push and pull framework

Author

Listed:
  • Figuet, Jean-Marc
  • Humblot, Thomas
  • Lahet, Delphine

Abstract

This paper outlines a framework for mapping the effects of Basel III increases in capital and liquidity requirements on cross-border bank lending to emerging market economies. In a traditional push and pull scheme, the effects of capital and liquidity ratios are disentangled through 6 specific push factors. Performing a GMM over the 1999–2010 period, we provide an assessment of the potential impact of each new regulatory standard on claims held by international banks from 16 advanced economies on 30 emerging countries. We provide evidence that the new regulation could result in an overall decrease of 20% in cross-border claim inflows.

Suggested Citation

  • Figuet, Jean-Marc & Humblot, Thomas & Lahet, Delphine, 2015. "Cross-border banking claims on emerging countries: The Basel III Banking Reforms in a push and pull framework," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 294-310.
    • Handle: RePEc:eee:intfin:v:34:y:2015:i:c:p:294-310
    DOI: 10.1016/j.intfin.2014.11.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1042443114001486
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intfin.2014.11.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chuhan, Punam & Claessens, Stijn & Mamingi, Nlandu, 1998. "Equity and bond flows to Latin America and Asia: the role of global and country factors," Journal of Development Economics, Elsevier, vol. 55(2), pages 439-463, April.
    2. David Miles & Jing Yang & Gilberto Marcheggiano, 2013. "Optimal Bank Capital," Economic Journal, Royal Economic Society, vol. 123(567), pages 1-37, March.
    3. Michael R King, 2010. "Mapping capital and liquidity requirements to bank lending spreads," BIS Working Papers 324, Bank for International Settlements.
    4. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    5. Mr. Thomas F. Cosimano & Ms. Dalia S Hakura, 2011. "Bank Behavior in Response to Basel Iii: A Cross-Country Analysis," IMF Working Papers 2011/119, International Monetary Fund.
    6. Inci Ötker & Ceyla Pazarbasioglu, 2010. "Impact of Regulatory Reforms on Large and Complex Financial Institutions," IMF Staff Position Notes 2010/16, International Monetary Fund.
    7. Comelli, Fabio, 2012. "Emerging market sovereign bond spreads: Estimation and back-testing," Emerging Markets Review, Elsevier, vol. 13(4), pages 598-625.
    8. Sabine Herrmann & Dubravko Mihaljek, 2010. "The determinants of cross-border bank flows to emerging markets: new empirical evidence on the spread of financial crises," BIS Working Papers 315, Bank for International Settlements.
    9. Liebig, Thilo & Porath, Daniel & Weder, Beatrice & Wedow, Michael, 2007. "Basel II and bank lending to emerging markets: Evidence from the German banking sector," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 401-418, February.
    10. Paolo Angelini & Laurent Clerc & Vasco Cúrdia & Leonardo Gambacorta & Andrea Gerali & Alberto Locarno & Roberto Motto & Werner Roeger & Skander Van den Heuvel & Jan Vlček, 2015. "Basel III: Long-term Impact on Economic Performance and Fluctuations," Manchester School, University of Manchester, vol. 83(2), pages 217-251, March.
    11. Marcelo Soto, 2009. "System GMM Estimation With A Small Sample," UFAE and IAE Working Papers 780.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    12. Beatrice Weder & Michael Wedow, 2002. "Will Basel II Affect International Capital Flows to Emerging Markets?," OECD Development Centre Working Papers 199, OECD Publishing.
    13. Patrick Slovik, 2012. "Systemically Important Banks and Capital Regulation Challenges," OECD Economics Department Working Papers 916, OECD Publishing.
    14. Maria Soledad Martinez Peria & Andrew Powell & Ivanna Vladkova-Hollar, 2005. "Banking on Foreigners: The Behavior of International Bank Claims on Latin America, 1985–2000," IMF Staff Papers, Palgrave Macmillan, vol. 52(3), pages 1-4.
    15. Maddala, G S & Wu, Shaowen, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    16. Valentina Bruno & Hyun Song Shin, 2013. "Capital Flows, Cross-Border Banking and Global Liquidity," NBER Working Papers 19038, National Bureau of Economic Research, Inc.
    17. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    18. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    19. Müller, Oliver & Uhde, André, 2013. "Cross-border bank lending: Empirical evidence on new determinants from OECD banking markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 136-162.
    20. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January.
    21. Stijn Claessens & Geoffrey R. D. Underhill & Xiaoke Zhang, 2008. "The Political Economy of Basle II: The Costs for Poor Countries," The World Economy, Wiley Blackwell, vol. 31(3), pages 313-344, March.
    22. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    23. Ghosh, , Swati R. & Sugawara, Naotaka & Zalduendo, Juan, 2011. "Banking flows and financial crisis -- financial interconnectedness and basel III effects," Policy Research Working Paper Series 5769, The World Bank.
    24. Hernandez, Leonardo & Rudolph, Heinz, 1995. "Sustainability of private capital flows to developing countries : Is a generalized reversal likely?," Policy Research Working Paper Series 1518, The World Bank.
    25. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    26. Patrick Slovik & Boris Cournède, 2011. "Macroeconomic Impact of Basel III," OECD Economics Department Working Papers 844, OECD Publishing.
    27. Brana, Sophie & Lahet, Delphine, 2010. "Determinants of capital inflows into Asia: The relevance of contagion effects as push factors," Emerging Markets Review, Elsevier, vol. 11(3), pages 273-284, September.
    28. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    29. Fernandez-Arias, Eduardo, 1996. "The new wave of private capital inflows: Push or pull?," Journal of Development Economics, Elsevier, vol. 48(2), pages 389-418, March.
    30. Ms. Inci Ötker & Ceyla Pazarbasioglu, 2010. "Impact of Regulatory Reforms on Large and Complex Financial Institutions," IMF Staff Position Notes 2010/016, International Monetary Fund.
    31. Blum, Jürg M., 2008. "Why 'Basel II' may need a leverage ratio restriction," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1699-1707, August.
    32. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    33. Elod Takats, 2010. "Was it credit supply? Cross-border bank lending to emerging market economies during the financial crisis," BIS Quarterly Review, Bank for International Settlements, June.
    34. Douglas Elliott & Mr. Andre O Santos, 2012. "Assessing the Cost of Financial Regulation," IMF Working Papers 2012/233, International Monetary Fund.
    35. Patrick McGuire & Philip Wooldridge, 2005. "The BIS consolidated banking statistics: structure, uses and recent enhancements," BIS Quarterly Review, Bank for International Settlements, September.
    36. Jean-Marc Figuet & Delphine Lahet, 2007. "Basel II and its Implications for Foreign Banks Financing Emerging Countries," Revue d’économie du développement, De Boeck Université, vol. 15(5), pages 47-67.
    37. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    38. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    39. Serge Jeanneau & Marian Micu, 2002. "Determinants of international bank lending to emerging market countries," BIS Working Papers 112, Bank for International Settlements.
    40. repec:pri:cepsud:237a%20shin is not listed on IDEAS
    41. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    42. Valentina Bruno & Hyun Song Shin, 2013. "Capital Flows, Cross-Border Banking and Global Liquidity," NBER Working Papers 19038, National Bureau of Economic Research, Inc.
    43. Fonseca, Ana Rosa & González, Francisco, 2010. "How bank capital buffers vary across countries: The influence of cost of deposits, market power and bank regulation," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 892-902, April.
    44. Mr. Fabio Comelli, 2012. "Emerging Market Sovereign Bond Spreads: Estimation and Back-testing," IMF Working Papers 2012/212, International Monetary Fund.
    45. Demirguc-Kunt, Asli & Huizinga, Harry, 2004. "Market discipline and deposit insurance," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 375-399, March.
    46. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    47. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amidu, Mohammed & Mohammed Sissy, Aisha & Haruna, Issahaku, 2017. "The effects of cross-border banking and institutional quality on accounting information of banks in Africa," MPRA Paper 101509, University Library of Munich, Germany, revised 15 Sep 2017.
    2. Judit Temesvary, 2018. "The Role Of Regulatory Arbitrage In U.S. Banks' International Flows: Bank‐Level Evidence," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2077-2098, October.
    3. Mutarindwa, Samuel & Schäfer, Dorothea & Stephan, Andreas, 2020. "The impact of liquidity and capital requirements on lending and stability of African banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 67(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haq, Mamiza & Faff, Robert & Seth, Rama & Mohanty, Sunil, 2014. "Disciplinary tools and bank risk exposure," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 37-64.
    2. Ghosh, , Swati R. & Sugawara, Naotaka & Zalduendo, Juan, 2011. "Banking flows and financial crisis -- financial interconnectedness and basel III effects," Policy Research Working Paper Series 5769, The World Bank.
    3. Sophie Brana & Delphine Lahet, 2011. "Foreign Banks and the Stability of Foreign and Domestic Credit in CEECs," Larefi Working Papers 201107, Larefi, Université Bordeaux 4.
    4. Marques Pereira, João André C. & Saito, Richard, 2015. "How banks respond to Central Bank supervision: Evidence from Brazil," Journal of Financial Stability, Elsevier, vol. 19(C), pages 22-30.
    5. Sophie Brana & Delphine Lahet, 2011. "Foreign banks and the stability of foreign and domestic credit in CEECs," Working Papers hal-00637686, HAL.
    6. Sophie Brana & Dalila Chenaf-Nicet & Delphine Lahet, 2023. "Drivers of cross-border bank claims: The role of foreign-owned banks in emerging countries," Working Papers 2023.06, International Network for Economic Research - INFER.
    7. Quang Thi Thieu Nguyen & Christopher Gan & Zhaohua Li, 2020. "Capital regulation and bank balance sheet adjustments: a simultaneous approach," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1563-1599, June.
    8. Vighneswara Swamy & Munusamy Dharani, 2020. "Thresholds of financial development in the Euro area," The World Economy, Wiley Blackwell, vol. 43(6), pages 1730-1774, June.
    9. Swamy, Vighneswara & Dharani, Munusamy, 2019. "The dynamics of finance-growth nexus in advanced economies," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 122-146.
    10. Karatas, B., 2014. "Financial crisis and monetary policy," Other publications TiSEM 41e463f0-e122-4379-8db5-6, Tilburg University, School of Economics and Management.
    11. Lee, Eun-Joo, 2017. "Intra- and inter-regional portfolio diversification strategies under regional market integration: Evidence from U.S. global banks," International Review of Financial Analysis, Elsevier, vol. 54(C), pages 1-22.
    12. Nataliia Osina, 2021. "Global governance and gross capital flows dynamics," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(3), pages 463-493, August.
    13. Brana, Sophie & Lahet, Delphine, 2010. "Determinants of capital inflows into Asia: The relevance of contagion effects as push factors," Emerging Markets Review, Elsevier, vol. 11(3), pages 273-284, September.
    14. Vighneswara Swamy & Dharani M, 2020. "The tipping point of financial development? – evidence from OECD countries," International Economics and Economic Policy, Springer, vol. 17(1), pages 125-165, February.
    15. Xiaowen Jiang, 2011. "The smoothing of pension expenses: a panel analysis," Review of Quantitative Finance and Accounting, Springer, vol. 37(4), pages 451-476, November.
    16. KAFANDO, Namalguebzanga, 2014. "L'industrialisation de l'Afrique: l'importance des facteurs structurels et du régime de change [The industrialization of Africa: the importance of structural factors and exchange rate regime]," MPRA Paper 68736, University Library of Munich, Germany.
    17. Jaunky, Vishal Chandr, 2011. "The CO2 emissions-income nexus: Evidence from rich countries," Energy Policy, Elsevier, vol. 39(3), pages 1228-1240, March.
    18. Maria Elena Bontempi & Roberto Golinelli, 2012. "The effect of neglecting the slope parameters’ heterogeneity on dynamic models of corporate capital structure," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1733-1751, November.
    19. Hardik A. Marfatia, 2016. "The Role of Push and Pull Factors in Driving Global Capital Flows," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 62(2), pages 117-146.
    20. Serge Jeanneau & Marian Micu, 2002. "International bank lending to emerging market countries: explaining the 1990s roller coaster," BIS Quarterly Review, Bank for International Settlements, March.

    More about this item

    Keywords

    Basel III; Cross-border bank lending; Capital flows; Emerging market economies; Push and pull factors;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:intfin:v:34:y:2015:i:c:p:294-310. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/intfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.