Evolution of Debt Financing toward Less-Regulated Financial Intermediaries in the United States

Isil Erel and Eduard Inozemtsev

No 32114, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Nonbank lenders have been playing an increasing role in supplying debt, especially after the Great Recession. How important are the distortions in the greater regulation of banks that differentially limit risk-taking across alternative providers of credit? How might the growing role of nonbanks in credit markets affect financial stability? This selective review addresses these questions and discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock. We argue that tighter bank regulation has created incentives for nonbanks to increase their participation in credit markets, a trend that creates concerns about financial stability.

JEL-codes: G21 G22 G23 G24 G28 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-fdg
Note: CF
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