Bank Risk-Taking Abroad

Does Home-Country Regulation and Supervision Matter

S. Ongena, A. Popov, G.F. Udell

Research output: Working paperDiscussion paperOther research output

35 Downloads (Pure)

Abstract

This paper provides the first empirical evidence on how home-country regulation and supervision affects bank risk-tailing in hostr-country markets. We analyze lending by 136 banks to 8,253 firms in 1,513 different localities across 13 countries. We find strong evidence that laxer regulatory restrictions in the home country are associated with higher loan rejection rates by banks in host-country markets, but that the resulting loans are mostly to small, unaudited, nonexporting, and innovative firms. The results are stronger when banks are less efficiently supervised at home, and they are observed independently from the effect that bank balance sheet have on lending. These findings imply that loose home-country regulation and supervision are associated with important negative externalities for the host-country in terms of more risk-taking by cross-border banks.
Original languageEnglish
Place of PublicationTilburg
PublisherEuropean Banking Center
Volume2011-007
Publication statusPublished - 2011

Publication series

NameEBC Discussion Paper
Volume2011-007

Fingerprint

Regulation and supervision
Bank risk taking
Home country
Lending
Host country
Loans
Cross-border
Balance sheet
Loan rates
Locality
Bank risk
Empirical evidence
Risk taking
Negative externalities

Keywords

  • bank regulation
  • cross-border financial institutions
  • financial risk

Cite this

Ongena, S., Popov, A., & Udell, G. F. (2011). Bank Risk-Taking Abroad: Does Home-Country Regulation and Supervision Matter. (EBC Discussion Paper; Vol. 2011-007). Tilburg: European Banking Center.
Ongena, S. ; Popov, A. ; Udell, G.F. / Bank Risk-Taking Abroad : Does Home-Country Regulation and Supervision Matter. Tilburg : European Banking Center, 2011. (EBC Discussion Paper).
@techreport{5396c9d5242f4681b8b959de7f3a5408,
title = "Bank Risk-Taking Abroad: Does Home-Country Regulation and Supervision Matter",
abstract = "This paper provides the first empirical evidence on how home-country regulation and supervision affects bank risk-tailing in hostr-country markets. We analyze lending by 136 banks to 8,253 firms in 1,513 different localities across 13 countries. We find strong evidence that laxer regulatory restrictions in the home country are associated with higher loan rejection rates by banks in host-country markets, but that the resulting loans are mostly to small, unaudited, nonexporting, and innovative firms. The results are stronger when banks are less efficiently supervised at home, and they are observed independently from the effect that bank balance sheet have on lending. These findings imply that loose home-country regulation and supervision are associated with important negative externalities for the host-country in terms of more risk-taking by cross-border banks.",
keywords = "bank regulation, cross-border financial institutions, financial risk",
author = "S. Ongena and A. Popov and G.F. Udell",
note = "Also CentER Discussion Paper 2011-032",
year = "2011",
language = "English",
volume = "2011-007",
series = "EBC Discussion Paper",
publisher = "European Banking Center",
type = "WorkingPaper",
institution = "European Banking Center",

}

Ongena, S, Popov, A & Udell, GF 2011 'Bank Risk-Taking Abroad: Does Home-Country Regulation and Supervision Matter' EBC Discussion Paper, vol. 2011-007, European Banking Center, Tilburg.

Bank Risk-Taking Abroad : Does Home-Country Regulation and Supervision Matter. / Ongena, S.; Popov, A.; Udell, G.F.

Tilburg : European Banking Center, 2011. (EBC Discussion Paper; Vol. 2011-007).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Bank Risk-Taking Abroad

T2 - Does Home-Country Regulation and Supervision Matter

AU - Ongena, S.

AU - Popov, A.

AU - Udell, G.F.

N1 - Also CentER Discussion Paper 2011-032

PY - 2011

Y1 - 2011

N2 - This paper provides the first empirical evidence on how home-country regulation and supervision affects bank risk-tailing in hostr-country markets. We analyze lending by 136 banks to 8,253 firms in 1,513 different localities across 13 countries. We find strong evidence that laxer regulatory restrictions in the home country are associated with higher loan rejection rates by banks in host-country markets, but that the resulting loans are mostly to small, unaudited, nonexporting, and innovative firms. The results are stronger when banks are less efficiently supervised at home, and they are observed independently from the effect that bank balance sheet have on lending. These findings imply that loose home-country regulation and supervision are associated with important negative externalities for the host-country in terms of more risk-taking by cross-border banks.

AB - This paper provides the first empirical evidence on how home-country regulation and supervision affects bank risk-tailing in hostr-country markets. We analyze lending by 136 banks to 8,253 firms in 1,513 different localities across 13 countries. We find strong evidence that laxer regulatory restrictions in the home country are associated with higher loan rejection rates by banks in host-country markets, but that the resulting loans are mostly to small, unaudited, nonexporting, and innovative firms. The results are stronger when banks are less efficiently supervised at home, and they are observed independently from the effect that bank balance sheet have on lending. These findings imply that loose home-country regulation and supervision are associated with important negative externalities for the host-country in terms of more risk-taking by cross-border banks.

KW - bank regulation

KW - cross-border financial institutions

KW - financial risk

M3 - Discussion paper

VL - 2011-007

T3 - EBC Discussion Paper

BT - Bank Risk-Taking Abroad

PB - European Banking Center

CY - Tilburg

ER -

Ongena S, Popov A, Udell GF. Bank Risk-Taking Abroad: Does Home-Country Regulation and Supervision Matter. Tilburg: European Banking Center. 2011. (EBC Discussion Paper).