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.description Updated February 27, 2020en
  • 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.en
  • 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.en
  • 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.identifier.uri http://hdl.handle.net/10230/37109
  • dc.language.iso catca
  • dc.relation.ispartofseries Economic Working Paper Series;1652
  • 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/openAccessca
  • 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.title The rise of shadow banking : evidence from capital regulationca
  • dc.type info:eu-repo/semantics/workingPaperca

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