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The rise of shadow banking : evidence from capital regulation

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dc.contributor.author Irani, Rustom M.
dc.contributor.author Iyer, Rajkamal
dc.contributor.author Meisenzahl, Ralf R.
dc.contributor.author Peydró, José-Luis
dc.date.accessioned 2019-04-12T10:14:08Z
dc.date.available 2019-04-12T10:14:08Z
dc.date.issued 2020
dc.identifier.uri http://hdl.handle.net/10230/37109
dc.description Updated February 27, 2020
dc.description.abstract 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.
dc.description.abstract (updated Feb. 27, 2020) 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, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation has important spillovers: during the 2008 crisis, loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility.
dc.description.sponsorship Peydró acknowledges financial support from both the Spanish Ministry of Economics and Competitiveness Feder EU (project ECO2015-68136-P) and the European Research Council Grant (project 648398).
dc.format.mimetype application/pdf
dc.language.iso cat
dc.relation.ispartofseries Economic Working Paper Series;1652
dc.title The rise of shadow banking : evidence from capital regulation
dc.type info:eu-repo/semantics/workingPaper
dc.subject.keyword Shadow banks
dc.subject.keyword Risk-based capital regulation
dc.subject.keyword Basel III
dc.subject.keyword Interactions between banks and nonbanks
dc.subject.keyword Trading by banks
dc.subject.keyword Distressed debt
dc.subject.keyword Non-performing loans
dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2015-68136-P
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/648398
dc.rights.accessRights info:eu-repo/semantics/openAccess

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