Template-Type: ReDIF-Paper 1.0
Title: Less Bank Regulation, More Non-Bank Lending
Author-Name: Mary Chen
Author-Email: mary.chen@bos.frb.org
Author-Name: Seung Jung Lee
Author-Email: seung.j.lee@frb.gov
Author-Name: Daniel Neuhann
Author-Email: daniel.neuhann@mccombs.utexas.edu
Author-Name: Farzad Saidi
Author-Email: saidi@uni-bonn.de
Classification-JEL: G20, G21, G23, G28
Keywords: Non-bank lending, bank deregulation, credit supply, loan liquidity, industrial
organization of financial markets

Abstract: Bank deregulation in the form of the repeal of the Glass-Steagall Act facilitated the
entry of non-bank lenders into the market for syndicated loans during the pre-2008
credit boom. Institutional investors disproportionately purchase tranches of loans
originated by universal banks able to cross-sell loans and underwriting services to
firms (as permitted by the repeal). A shock to cross-selling intensity increases loan
liquidity at origination and over time. The mechanism is that non-loan exposures ensure
monitoring even when banks retain small loan shares. Our findings complement
the conventional view that regulatory arbitrage caused the rise of non-bank lenders.

Note: 
Length: 37
Creation-Date: 2023-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp418
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_418