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Cross-border regulatory spillovers: How much? How important? What sectors? Lessons from the United Kingdom

Author

Listed:
  • Hills, Robert

    () (Bank of England)

  • Reinhardt, Dennis

    () (Bank of England)

  • Sowerbutts, Rhiannon

    () (Bank of England)

  • Wieladek, Tomasz

    () (Barclays Capital)

Abstract

This paper forms the United Kingdom’s contribution to the International Banking Research Network’s project examining the cross-border spillovers of prudential policy actions, where each participant in the network uses proprietary bank-level data available to central banks. We examine whether UK-owned banks’ domestic lending is affected by prudential actions in other countries where they have exposures. We also examine the impact of a change in prudential policy in a foreign-owned UK-resident bank’s home jurisdiction on its lending to the United Kingdom. Our results suggest that prudential actions taken abroad do not have significant spillover effects on bank lending in the UK economy as a whole. But there are more granular effects: for instance, when a foreign authority tightens loan-to-value standards, UK affiliates of banks owned from that country expand their lending to UK households and corporates.

Suggested Citation

  • Hills, Robert & Reinhardt, Dennis & Sowerbutts, Rhiannon & Wieladek, Tomasz, 2016. "Cross-border regulatory spillovers: How much? How important? What sectors? Lessons from the United Kingdom," Bank of England working papers 595, Bank of England.
  • Handle: RePEc:boe:boeewp:0595
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2016/cross-border-regulatory-spillovers-how-much-how-important-what-sectors.pdf?la=en&hash=73B994EF1CFE46D482BA25CD2BC4AFD79B73823E
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    References listed on IDEAS

    as
    1. Kuttner, Kenneth N. & Shim, Ilhyock, 2016. "Can non-interest rate policies stabilize housing markets? Evidence from a panel of 57 economies," Journal of Financial Stability, Elsevier, vol. 26(C), pages 31-44.
    2. Hoggarth, Glenn & Hooley, John & Korniyenko, Yevgeniya, 2013. "Financial Stability Paper No 22: Which way do foreign branches sway? Evidence from the recent UK domestic credit cycle," Bank of England Financial Stability Papers 22, Bank of England.
    3. Reinhardt, Dennis & Sowerbutts, Rhiannon, 2015. "Regulatory arbitrage in action: evidence from banking flows and macroprudential policy," Bank of England working papers 546, Bank of England.
    4. Joel F. Houston & Chen Lin & Yue Ma, 2012. "Regulatory Arbitrage and International Bank Flows," Journal of Finance, American Finance Association, vol. 67(5), pages 1845-1895, October.
    5. International Monetary Fund, 2011. "Macroprudential Policy; What Instruments and How to Use them? Lessons From Country Experiences," IMF Working Papers 11/238, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

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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. 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.
    3. 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.
    4. Hoggarth, Glen & Jung, Carsten & Reinhardt, Dennis, 2016. "Capital inflows — the good, the bad and the bubbly," Bank of England Financial Stability Papers 40, Bank of England.
    5. 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.

    More about this item

    Keywords

    Macroprudential policies; bank lending; spillovers; capital flows;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • 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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