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San Diego State University

Fowler College of
Business Administration

Intellectual Contribution

Title
Basel 3, Dodd-Frank and sovereign exposures of US banks
Author(s)
Ely, D., Salehizadeh, M.
Type of Research
Peer-Reviewed Journal Articles
Date Published
2013, After July
Contribution Type
Discipline-based scholarship (basic research)
Contribution Category
C
Points
6
Publication Title
International Journal of Financial Services Management
Publisher
Inderscience Enterprises
Volume(s)
6
Edition
2
Page Number(s)
118-137
URL
http://www.inderscience.com/info/inarticle.php?artid=56346
Abstract
The Dodd-Frank Wall Street Reform and Consumer Protection Act calls for the elimination of references to credit ratings in US banking regulations. This study's key finding is that US banks' lending to foreign borrowers does not appear to have been closely and consistently correlated with changes in sovereign credit ratings in the recent past. The evidence is weakest over 2007-2012. Thus, it is doubtful that the elimination of references to credit ratings will have a significant impact on banks' lending behaviour toward foreign borrowers. This finding lends support to serious consideration of alternative proposals, including those put forward by US regulators that seek to increase the sensitivity of capital requirements to sovereign risk levels, and one advanced in this study which relies on a joint regulatory mechanism by the BIS and the IMF.