Journal of Banking & Finance Vol. 154 2023
Quality is our asset: The international transmission of liquidity regulation
Abstract
We examine how banks’ cross-border lending reacts to changes in the intensity of liquidity regulation using a new dataset on the UK’s Individual Liquidity Guidance. An increase in requirements reduces banks’ cross-border lending growth to banks and non-banks. But banks’ business models determine how they adjust: banks with higher deposit shares, such as those with UK retail operations, protect lending more; banks also preserve lending to countries they do most business, cutting elsewhere; foreign subsidiaries from countries not eligible to issue High Quality Liquid Assets (HQLA) show the strongest reduction in lending; in contrast, subsidiaries from HQLA-issuing countries cut intragroup lending.
- DOI
- 10.1016/j.jbankfin.2023.106919
- Volume
- 154
- Pages
- 106919
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref