Shadow banking and competition: decomposing market power by activity

Daniele Titotto and Steven Ongena

Chapter 13 in Handbook of Competition in Banking and Finance, 2017, pp 264-304 from Edward Elgar Publishing

Abstract: The term “shadow banking†refers to credit intermediation performed outside the regulated perimeter of traditional lenders. Banks, however, do play a significant role in it. The authors review the origins and characteristics of the shadow banking system, investigate how banks control various steps of the securitization process, and analyze the nexus with competition. They use a double-output formulation of the Lerner index to disentangle the market power of lending and non-traditional activities. They find important differences in the two indicators, consistently with the common narrative. The market power related to non-traditional activities is both larger in magnitude and more pro-cyclical than that estimated for traditional lending. The authors’ findings suggest that banks might engage in less traditional business lines to alleviate the competitive pressure borne on core activities.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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