Global Banks and Local Rules: The Effects of Macroprudential Policy on US Bank Branch Lending

ABSTRACT The discretionary nature of macroprudential policy implementation may stimulate regulatory arbitrage opportunities by global banks, undermining national regulators’ efforts to fine‐tune business, credit or financial cycles within the domestic perimeter. This paper examines how local macroprudential tools affect the lending behaviour of foreign branches of US banks across more than 50 jurisdictions. Our findings suggest that local macroprudential measures generally reduce foreign‐branch bank lending, with financial institution‐focused tools having the strongest contractionary impact. Borrower‐focused measures have limited effect, while tax instruments show weak positive effects. Moreover, branch presence and derivatives positions attenuate this contractionary effect, pointing to organisational and balance‐sheet flexibility as channels through which global banks preserve local lending capacity.