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The $4 trillion question: what is the impact of prudential regulation?

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  • Kammourieh, Sima
  • Devie, Jules

Abstract

Emerging markets and developing economies continue to face significant economic and financial challenges. The world bank’s 2024 international debt statistics highlight persistent negative external transfers impacting sovereign debt worldwide, driven mainly by high interest rates. Lower middle-income countries are most affected, but more integrated markets feel these pressures, too. Global uncertainty—like us trade policies and potential interest rate hikes—adds further complexity. As discussions around the cost of capital in developing countries (Africa especially) have come to the fore, one key question has gained renewed focus in recent times, namely: did the changes to the regulatory regime of commercial banks enacted after the Global Financial Crisis (GFC) play a role in changing the quantity and quality of private financial flows to EMDEs?

Suggested Citation

  • Kammourieh, Sima & Devie, Jules, 2025. "The $4 trillion question: what is the impact of prudential regulation?," FDL Policy Notes 2510, CEPREMAP.
    • Handle: RePEc:cpm:notfdl:2510
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    References listed on IDEAS

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    3. Fang, Xiang & Jutrsa, David & Peria, Soledad Martinez & Presbitero, Andrea F. & Ratnovski, Lev, 2022. "Bank capital requirements and lending in emerging markets: The role of bank characteristics and economic conditions," Journal of Banking & Finance, Elsevier, vol. 135(C).
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    5. Chang, Roberto & Fernández, Andrés & Gulan, Adam, 2017. "Bond finance, bank credit, and aggregate fluctuations in an open economy," Journal of Monetary Economics, Elsevier, vol. 85(C), pages 90-109.
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