Banks and Capital Flows: Policy Challenges and Regulatory Responses

Financial integration offers many benefits, but also poses risks. Recent events—from the U.S. subprime mortgage crisis to capital flow reversals and the European banking crisis—have shaken the faith that even advanced economies can harness the benefits of greater financial flows and deepen financial integration without incurring costs. These observations point to the question of how best to benefit from greater financial integration while limiting adverse effects, especially the risks posed by cross-border banking flows.

On September 26, Global Economy and Development at Brookings hosted a discussion to launch a new report by the Committee on International Economic Policy and Reform (CIEPR)—a group of independent economic experts that includes academics as well as former government and central bank officials. In this report, the committee draws on the growing body of evidence on cross-border banking flows in an effort to better understand their effects in practice. Building on this analysis, the committee makes specific policy proposals for improving domestic banking regulation and also for cross-border regulatory coordination. Panelists included committee members José De Gregorio, former Chilean central bank governor; Hyun Song Shin of Princeton University; and Jean Pisani-Ferry of Bruegel. Brookings Senior Fellow Donald Kohn also joined the panel. Brookings Senior Fellow and Cornell University Professor Eswar Prasad, who is also a member of CIEPR, moderated the discussion. After the program, the panelists took audience questions.

You can follow the conversation on this event on Twitter using the hashtag #CIEPR.

Read the CIEPR report, titled “Banks and Cross-Border Capital Flows: Policy Challenges and Regulatory Responses” »