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

72 Pages Posted: 6 Feb 2024

See all articles by Isil Erel

Isil Erel

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Eduard Inozemtsev

University of Melbourne - Faculty of Business and Economics

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Date Written: February 2024

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.

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Suggested Citation

Erel, Isil and Inozemtsev, Eduard, Evolution of Debt Financing Toward Less-Regulated Financial Intermediaries in the United States (February 2024). NBER Working Paper No. w32114, Available at SSRN: https://ssrn.com/abstract=4716678

Isil Erel (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

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National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Eduard Inozemtsev

University of Melbourne - Faculty of Business and Economics ( email )

Level 11, 198 Berkeley Street
The University of Melbourne
Melbourne, VIC 3010
Australia

HOME PAGE: http://einozemtsev.com

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