International prudential policy spillovers: a global perspective

BIS Working Papers No 589
October 2016

Published in: International Journal of Central Banking , vol 13(S1), 2017, pp 5-33.

We combine the BIS international banking statistics with the IBRN prudential instruments database in a global study analyzing the effect of prudential measures on international lending. Our bilateral setting, which features multiple home and destination countries, allows us to simultaneously estimate both the international transmission and the local effects of such measures. We find that changes in macroprudential policy via loan-to-value limits and local currency reserve requirements have a significant impact on international bank lending. Balance sheet characteristics play an important role in determining the strength of these effects, with better capitalized banking systems and those with more liquid assets and less core deposits reacting more. Overall, our results suggest that the tightening of these macroprudential measures can be associated with international spillovers.

JEL classification: F42, G15, G21

Keywords: International banking, macroprudential measures, spillovers