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International Banking and Cross-Border Effects of Regulation: Lessons from Canada

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  • H. Evren Damar
  • Adi Mordel

Abstract

We study how changes in prudential requirements affect cross-border lending of Canadian banks by utilizing an index that aggregates adjustments in key regulatory instruments across jurisdictions. We show that when a destination country tightens local prudential measures, Canadian banks lend more to that jurisdiction, and the effect is particularly significant when capital requirements are tightened and weaker if banks lend mainly via affiliates. Our evidence also suggests that Canadian banks adjust foreign lending in response to domestic regulatory changes. The results confirm the presence of heterogeneous spillover effects of foreign prudential requirements.

Suggested Citation

  • H. Evren Damar & Adi Mordel, 2016. "International Banking and Cross-Border Effects of Regulation: Lessons from Canada," Staff Working Papers 16-34, Bank of Canada.
  • Handle: RePEc:bca:bocawp:16-34
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    References listed on IDEAS

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    1. Jose M. Berrospide & Ricardo Correa & Linda S. Goldberg & Friederike Niepmann, 2016. "International Banking and Cross-Border Effects of Regulation : Lessons from the United States," International Finance Discussion Papers 1180, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Avdjiev, Stefan & Gambacorta, Leonardo & Goldberg, Linda S. & Schiaffi, Stefano, 2017. "The shifting drivers of global liquidity," CEPR Discussion Papers 12127, C.E.P.R. Discussion Papers.
    2. Jose M Berrospide & Ricardo Correa & Linda S Goldberg & Friederike Niepmann, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from the United States," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 435-476, March.
    3. Ohls, Jana & Pramor, Marcus & Tonzer, Lena, 2016. "International banking and cross-border effects of regulation: Lessons from Germany," Discussion Papers 27/2016, Deutsche Bundesbank.
    4. H. Evren Damar & Miguel Molico, 2016. "On the Nexus of Monetary Policy and Financial Stability: Effectiveness of Macroprudential Tools in Building Resilience and Mitigating Financial Imbalances," Discussion Papers 16-11, Bank of Canada.
    5. Jon Frost & Jakob de Haan & Neeltje van Horen, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from the Netherlands," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 293-313, March.
    6. Alejandro Jara & Luis Cabezas, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from Chile," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 95-127, March.
    7. Gabriel Levin-Konigsberg & Calixto López & Fabrizio López-Gallo & Serafín Martínez-Jaramillo, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from Mexico," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 249-271, March.
    8. Claudia M Buch & Linda S Goldberg, 2017. "Cross-Border Prudential Policy Spillovers: How Much? How Important? Evidence from the International Banking Research Network," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 505-558, March.
    9. Robert McKeown, 2017. "An Overview of the Canadian Banking System: 1996 to 2015," Working Papers 1379, Queen's University, Department of Economics.
    10. Jana Ohls & Marcus Pramor & Lena Tonzer, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from Germany," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 129-162, March.

    More about this item

    Keywords

    Financial Institutions; Financial stability; Financial system regulation and policies;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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