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Bank Capital Regulation with Asymmetric Countries

Author

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  • Damien S. Eldridge
  • Heajin H. Ryoo
  • Axel Wieneke

Abstract

type="main" xml:id="ecor12152-abs-0001"> When financial markets are global, the impacts of national banking regulations extend beyond national borders. While lax regulatory enforcement improves the profitability of home banks, it also increases loan supply, which in turn reduces the global interest rate spreads. In a two-country model we show that each regulator's enforcement choice is affected by the relative size of the national financial market. An authority regulating a smaller market has a smaller impact on global interest rates and therefore a stronger incentive to relax regulatory enforcement.

Suggested Citation

  • Damien S. Eldridge & Heajin H. Ryoo & Axel Wieneke, 2015. "Bank Capital Regulation with Asymmetric Countries," The Economic Record, The Economic Society of Australia, vol. 91(292), pages 79-90, March.
    • Handle: RePEc:bla:ecorec:v:91:y:2015:i:292:p:79-90
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    File URL: http://hdl.handle.net/10.1111/ecor.2015.91.issue-292
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    1. Viral V. Acharya, 2003. "Is the International Convergence of Capital Adequacy Regulation Desirable?," Journal of Finance, American Finance Association, vol. 58(6), pages 2745-2782, December.
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    5. Dell'Ariccia, Giovanni & Marquez, Robert, 2006. "Competition among regulators and credit market integration," Journal of Financial Economics, Elsevier, vol. 79(2), pages 401-430, February.
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    Cited by:

    1. Park, Sungmin & Kim, Young-Han, 2018. "International policy coordination for financial regime stability under cross-border externalities," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 177-188.
    2. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2022. "Financial spillovers, spillbacks, and the scope for international macroprudential policy coordination," International Economics and Economic Policy, Springer, vol. 19(1), pages 79-127, February.
    3. David VanHoose, 2013. "Should Financial Regulators Engage in International Policy Coordination?," NFI Policy Briefs 2013-PB-04, Indiana State University, Scott College of Business, Networks Financial Institute.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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