A Gap in Regulation and the Looser Lending Standards that Followed

Yuliya Demyanyk and Elena Loutskina

Economic Commentary, 2014, issue Oct

Abstract: New research highlights how disparities in the regulatory treatment of banks and shadow banking organizations before the fi nancial crisis allowed heavily-regulated bank holding companies to lend through their less-regulated subsidiaries. Doing so helped them to conserve their regulatory capital, avoid recognizing costly loan losses, and pursue riskier lending while still adhering to banking regulations.

Date: 2014
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