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Journal Article
| Journal of Finance
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June 2009
Level Playing Fields in International Financial Regulation
by
Lucy White and Alan Morrison
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Abstract
We analyze the desirability of level playing fields in international financial regulation. In general, level playing fields impose the standards of the weakest regulator upon the best-regulated economies. However, they may be desirable when capital is mobile because they counter a cherry-picking effect that lowers the size and efficiency of banks in weaker economies. Hence, while a laissez faire policy favours the better-regulated economy, level playing fields are good for weaker regulators. We show that multinational banking mitigates the cherrypicking effect, and reduces the damage that a level playing field causes in the better-regulated economy.
Keywords: Economy;
International Finance;
Multinational Firms and Management;
Governing Rules, Regulations, and Reforms;
Standards;
Banking Industry;