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On a tight leash: does bank organisational structure matter for macroprudential spillovers?

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  • Danisewicz, Piotr

    (Lancaster University)

  • Reinhardt, Dennis

    (Bank of England)

  • Sowerbutts, Rhiannon

    (Bank of England)

Abstract

This paper examines whether cross-border spillovers of macroprudential regulation depend on the organisational structure of banks’ foreign affiliates. Our analysis compares the response of foreign banks’ branches versus subsidiaries in the United Kingdom to changes in macroprudential regulations in foreign banks’ home countries. By focusing on branches and subsidiaries of the same banking group, we are able to control for all the factors affecting parent banks’ decisions regarding the lending of their foreign affiliates. We document that there are important differences between the type of regulation and the type of lending. Following a tightening of capital regulation, branches of multinational banks reduce interbank lending growth by 6 percentage points more relative to subsidiaries of the same banking group. Lending to non-banks does not exhibit such differences. A tightening in lending standards or reserve requirements at home does not have differential effects on both interbank and non-bank lending in the United Kingdom.

Suggested Citation

  • Danisewicz, Piotr & Reinhardt, Dennis & Sowerbutts, Rhiannon, 2015. "On a tight leash: does bank organisational structure matter for macroprudential spillovers?," Bank of England working papers 524, Bank of England.
  • Handle: RePEc:boe:boeewp:0524
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    Cited by:

    1. 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.
    2. Rubio, Margarita, 2020. "Cross-country spillovers from macroprudential regulation: Reciprocity and leakage," Journal of International Money and Finance, Elsevier, vol. 103(C).
    3. Norring, Anni, 2019. "Macroprudential policy spillovers and international banking - Taking the gravity approach," ESRB Working Paper Series 101, European Systemic Risk Board.
    4. Darracq Pariès, Matthieu & Kok, Christoffer & Rancoita, Elena, 2019. "Macroprudential policy in a monetary union with cross-border banking," Working Paper Series 2260, European Central Bank.
    5. Mr. Fabian Valencia & Juliana Dutra Araujo & Ms. Adina Popescu & Manasa Patnam & Weijia Yao, 2020. "Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates," IMF Working Papers 2020/067, International Monetary Fund.
    6. Fillat, José L. & Garetto, Stefania & Smith, Arthur, 2018. "What are the consequences of global banking for the international transmission of shocks? A quantitative analysis," CEPR Discussion Papers 13274, C.E.P.R. Discussion Papers.
    7. Robert Hills & Dennis Reinhardt & Rhiannon Sowerbutts & Tomasz Wieladek, 2017. "International Banking and Cross-Border Effects of Regulation: Lessons from the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 404-433, March.
    8. Franch, Fabio & Nocciola, Luca & Żochowski, Dawid, 2021. "Cross-border effects of prudential regulation: Evidence from the euro area," Journal of Financial Stability, Elsevier, vol. 53(C).
    9. Herzberg, Valerie & McQuade, Peter, 2018. "International bank flows and bank business models since the crisis," Financial Stability Notes 5/FS/18, Central Bank of Ireland.
    10. Herzberg, Valerie & McQuade, Peter, 2018. "International bank flows and bank business models since the crisis," Financial Stability Notes 05-18, Central Bank of Ireland.
    11. José L. Fillat & Stefania Garetto & Arthur V. Smith, 2018. "What are the Consequences of Global Banking for the International Transmission of Shocks? A Quantitative Analysis," NBER Working Papers 25203, National Bureau of Economic Research, Inc.
    12. Jose L. Fillat & Stefania Garetto & Arthur V. Smith, 2018. "What are the consequences of global banking for the international transmission of shocks? A quantitative analysis∗," Boston University - Department of Economics - Working Papers Series WP2019-01, Boston University - Department of Economics, revised Oct 2018.
    13. Financial Stability Committee, Task Force on cross-border Spillover Effects of macroprudential measures & Kok, Christoffer & Reinhardt, Dennis, 2020. "Cross-border spillover effects of macroprudential policies: a conceptual framework," Occasional Paper Series 242, European Central Bank.

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    More about this item

    Keywords

    Macro prudential regulation; cross-border lending; credit supply; foreign banks organisational structure;
    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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