Financing Modes and Lender Monitoring

Arturo Antón-Sarabia, Kaniska dup Dam and Rajdeep Sengupta

No RWP 23-13, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: Shadow banks are widely believed to be a creation of financial regulation and regulatory arbitrage. We show that bank and nonbank modes of financing can emerge endogenously in a simple borrower-lender framework absent regulatory arbitrage or policy interventions. The coexistence of banks and shadow banks in the absence of regulatory intervention speaks to the importance of shadow banks as alternative modes of financial intermediation. We explore the scope of regulation in determining the size and location of shadow banking, as opposed to how regulation can be designed to curtail shadow bank activities.

Keywords: banking and finance; monetary policy; shadow banks; regulatory arbitrage; financial regulations (search for similar items in EconPapers)
JEL-codes: D82 G21 G28 G32 L25 (search for similar items in EconPapers)
Pages: 23
Date: 2023-11-07
New Economics Papers: this item is included in nep-ban, nep-cba and nep-fdg
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