by Marianna Caccavaio, Luisa Carpinelli, and Giuseppe Marinelli
Banca d'Italia
In this paper we study how foreign lending by Italian banks adjust to prudential policy changes of destination markets over the period 2000-14. We find a positive prudential spillover effect: Italian banks tend to lend more to countries that tighten a prudential measure. The impact is not very large nevertheless, and it is driven by cross-border lending and lending by hosted branches that are not directly affected by the changes in regulations. This evidence highlights the need for international cooperation among authorities.
JEL Codes: G20, G21.
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