RWP 21-13, November 2021; updated May 2026
Several countries do not or only partially follow basic international regulatory guidelines. Though these countries are small, they aggregate to a nontrivial portion of the global financial market. This paper studies the incentives of regulators to coordinate their efforts and shows that countries with a small banking sector may oppose any financial regulation, even as larger countries commit to stricter rules. As a result, it may be infeasible to design regulatory minimum standards that are enforced by all jurisdictions, which explains key issues around the implementation of the Basel Agreements.
JEL Classifications: D62, F36, F42 G15, G21
Article Citation
Matschke, Johannes. 2022. “International Financial Regulation: The Role of Banking Sector Sizes.” Federal Reserve Bank of Kansas City, Research Working Paper no. 21-13, September. Available at External Linkhttps://doi.org/10.18651/RWP2021-13
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
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