The Rise of Shadow Banking: Evidence from Capital Regulation
Rustom M Irani,
Ralf Meisenzahl and
Jose-Luis Peydro ()
No 12913, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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 identification, 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 find that less-capitalized banks reduce loan retention and nonbanks step in, particularly among loans with higher capital requirements and at times when capital is scarce. This reallocation has important spillovers: loans funded by nonbanks with fragile liabilities experience greater sales and price volatility during the 2008 crisis.
Keywords: Basel III; Distressed debt; Interactions between banks and nonbanks; Risk-based capital regulation; Shadow banks; Trading by banks (search for similar items in EconPapers)
JEL-codes: G01 G21 G23 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
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Journal Article: The Rise of Shadow Banking: Evidence from Capital Regulation (2021)
Journal Article: The rise of shadow banking: Evidence from capital regulation (2021)
Working Paper: The rise of shadow banking: evidence from capital regulation (2020)
Working Paper: The Rise of Shadow Banking: Evidence from Capital Regulation (2020)
Working Paper: The Rise of Shadow Banking: Evidence from Capital Regulation (2019)
Working Paper: The Rise of Shadow Banking: Evidence from Capital Regulation (2018)
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