eprintid: 10189190 rev_number: 11 eprint_status: archive userid: 699 dir: disk0/10/18/91/90 datestamp: 2024-03-15 09:59:00 lastmod: 2024-08-12 10:51:52 status_changed: 2024-03-15 09:59:00 type: article metadata_visibility: show sword_depositor: 699 creators_name: Bahaj, Saleem creators_name: Malherbe, Frederic title: The cross-border effects of bank capital regulation ispublished: pub divisions: UCL divisions: B04 divisions: C05 divisions: F49 keywords: CCyB; International coordination; Race to the bottom; Race to the top; Liquidity services note: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. abstract: We study the international coordination of bank capital requirements under a host-country rule: the requirement depends on where the borrower, not the bank, is located. In such a regime, countries compete for scarce bank equity capital. Raising a country’s requirement may generate bank capital outflows as well as inflows. We pin down the condition for the sign of the capital flow and the associated externality, and highlight the policy implications. Absent collaboration, overshooting is likely: individual countries have an incentive to increase Basel III’s Counter-Cyclical Capital Buffer too much in good times and cut it too much in bad times. date: 2024-10 date_type: published publisher: Elsevier official_url: https://doi.org/10.1016/j.jfineco.2024.103912 full_text_type: other language: eng verified: verified_manual elements_id: 2258065 doi: 10.1016/j.jfineco.2024.103912 lyricists_name: Malherbe, Frederic lyricists_id: FMALH20 actors_name: Malherbe, Frederic actors_id: FMALH20 actors_role: owner full_text_status: restricted publication: Journal of Financial Economics volume: 160 article_number: 103912 issn: 0304-405X citation: Bahaj, Saleem; Malherbe, Frederic; (2024) The cross-border effects of bank capital regulation. Journal of Financial Economics , 160 , Article 103912. 10.1016/j.jfineco.2024.103912 <https://doi.org/10.1016/j.jfineco.2024.103912>. document_url: https://discovery.ucl.ac.uk/id/eprint/10189190/1/CBE.pdf