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How will Basel II affect bank lending to emerging markets? An analysis based on German bank level data

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  • Liebig, Thilo
  • Porath, Daniel
  • di Mauro, Beatrice Weder
  • Wedow, Michael

Abstract

This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a comprehensive new data set on German banks` foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new regulatory capital requirement remains below the economic capital and (ii) banks' economic capital to emerging markets already adequately reflects risk. On both accounts the evidence indicates that the new Basel Accord should have a limited effect on lending to emerging markets.

Suggested Citation

  • Liebig, Thilo & Porath, Daniel & di Mauro, Beatrice Weder & Wedow, Michael, 2004. "How will Basel II affect bank lending to emerging markets? An analysis based on German bank level data," Discussion Paper Series 2: Banking and Financial Studies 2004,05, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp2:4254
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    References listed on IDEAS

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    1. Powell, Andrew, 2002. "A capital accord for emerging economies?," Policy Research Working Paper Series 2808, The World Bank.
    2. Brunner, Antje & Pieter, Jan & Weber, Martin, 2000. "Information production in credit relationship: On the role of internal ratings in commercial banking," CFS Working Paper Series 2000/10, Center for Financial Studies (CFS).
    3. Beatrice Weder & Michael Wedow, 2002. "Will Basel II Affect International Capital Flows to Emerging Markets?," OECD Development Centre Working Papers 199, OECD Publishing.
    4. Linda S. Goldberg, 2002. "When Is U.S. Bank Lending to Emerging Markets Volatile?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 171-196 National Bureau of Economic Research, Inc.
    5. Guillermo A. Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco.
    6. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
    7. Thomas C. Wilson, 1998. "Portfolio credit risk," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 71-82.
    8. Buch, Claudia M., 2000. "Information or Regulation: What Is Driving the International Activities of Commercial Banks?," Kiel Working Papers 1011, Kiel Institute for the World Economy (IfW).
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, pages 115-143.
    10. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53.
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    Cited by:

    1. Ruthenberg, David & Landskroner, Yoram, 2008. "Loan pricing under Basel II in an imperfectly competitive banking market," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2725-2733, December.
    2. Alicia García-Herrero & Sergio Gavilá, 2006. "Posible impacto de Basilea II en los países emergentes," Boletín, Centro de Estudios Monetarios Latinoamericanos, pages 103-124.
    3. repec:rej:journl:v:19:y:2016:i:61:p:123-146 is not listed on IDEAS

    More about this item

    Keywords

    Basel Accord; Banking Regulation; International Lending;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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