6533b7dcfe1ef96bd1271de5

RESEARCH PRODUCT

Basel II and bank lending to emerging markets: Evidence from the German banking sector

Michael WedowThilo LiebigDaniel PorathBeatrice WederBeatrice Weder

subject

Economics and EconometricsCapital adequacy ratioBasel IFinancial capitalEconomic policyEconomic capitalRisk-adjusted return on capitalRisk-weighted assetEconomicsCapital requirementFinancial systemBasel IIFinance

description

Abstract This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a comprehensive new data set on German banks’ foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new regulatory capital requirement remains below the economic capital and (ii) banks’ economic capital to emerging markets already adequately reflects risk. On both accounts the evidence indicates that the new Basel Accord should have a limited effect on lending to emerging markets.

yearjournalcountryeditionlanguage
2007-02-01Journal of Banking & Finance
https://doi.org/10.1016/j.jbankfin.2006.05.017