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The impact of regulatory requirements on the banking flows to emerging countries

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  • Samira Hellou
  • Michel Boutillier

Abstract

The strengthening of regulatory requirements, along with evolution in banking regulations, can have a negative impact on the external bank financing of emerging countries heavily dependent on this type of financing. Indeed, several studies have aroused fears about the potential effects of significant regulatory adjustments on bank lending to emerging markets. This paper presents a trial to estimate the sensitivity of the banking flows to increased regulatory requirements. We adopt a macroeconomic approach based on the determinants of cross-border banking claims flows from banks located in 19 developed countries to 37 emerging countries. The results of the GMM estimation confirm the negative impact of regulatory requirements on the banking flows to emerging countries, the significant impact of business openness and the negative effect of bank financialization on banking flows to these countries. The results also show that countries rated as speculative grade are influenced by the regulatory requirements, unlike countries rated in investment grade category.

Suggested Citation

  • Samira Hellou & Michel Boutillier, 2017. "The impact of regulatory requirements on the banking flows to emerging countries," EconomiX Working Papers 2017-9, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2017-9
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    References listed on IDEAS

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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