The Rise of Shadow Banking: Evidence from Capital Regulation

Rustom M Irani, Rajkamal Iyer, Ralf R Meisenzahl and Peydró, José-Luis
Authors registered in the RePEc Author Service: Jose-Luis Peydro

No 12913, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identi cation, we exploit a supervisory credit register of syndicated loans, loan-time fixed-effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We nd that less-capitalized banks reduce loan retention, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation has important spillovers: during the 2008 crisis, loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility.

Keywords: Shadow banks; Risk-based capital regulation; Basel iii; Interactions between banks and nonbanks; Trading by banks; Distressed debt (search for similar items in EconPapers)
JEL-codes: G01 G21 G23 G28 (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
https://cepr.org/publications/DP12913 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The Rise of Shadow Banking: Evidence from Capital Regulation (2021)
Working Paper: The Rise of Shadow Banking: Evidence from Capital Regulation (2019)
Working Paper: The Rise of Shadow Banking: Evidence from Capital Regulation (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12913

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP12913

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().