Cross-border banking claims on emerging countries: The Basel III Banking Reforms in a push and pull framework

This paper outlines a framework for mapping the effects of Basel III increases in capital and liquidity requirements on cross-border bank lending to emerging market economies. In a traditional push and pull scheme, the effects of capital and liquidity ratios are disentangled through 6 specific push factors. Performing a GMM over the 1999–2010 period, we provide an assessment of the potential impact of each new regulatory standard on claims held by international banks from 16 advanced economies on 30 emerging countries. We provide evidence that the new regulation could result in an overall decrease of 20% in cross-border claim inflows.