NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Fintech, Regulatory Arbitrage, and the Rise of Shadow Banks

Greg Buchak, Gregor Matvos, Tomasz Piskorski, Amit Seru

NBER Working Paper No. 23288
Issued in March 2017, Revised in September 2018
NBER Program(s):Corporate Finance, Law and Economics, Monetary Economics

Shadow bank market share in residential mortgage origination nearly doubled from 2007-2015, with particularly dramatic growth among online “fintech” lenders. We study how two forces, regulatory differences and technological advantages, contributed to this growth. Difference in difference tests exploiting geographical heterogeneity induced by four specific increases in regulatory burden–capital requirements, mortgage servicing rights, mortgage-related lawsuits, and the movement of supervision to Office of Comptroller and Currency following closure of the Office of Thrift Supervision--all reveal that traditional banks contracted in markets where they faced more regulatory constraints; shadow banks partially filled these gaps. Fintech lenders appear to offer a higher quality product and charge a premium of 14-16 basis points. Relative to other lenders, they seem to use different information to set interest rates. A quantitative model of mortgage lending suggests that regulation accounts for roughly 60% of shadow bank growth, while technology accounts for roughly 30%.

download in pdf format
   (1278 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23288

Published: Greg Buchak & Gregor Matvos & Tomasz Piskorski & Amit Seru, 2018. "Fintech, Regulatory Arbitrage, and the Rise of Shadow Banks," Journal of Financial Economics, .

Users who downloaded this paper also downloaded* these:
Greenwood, Shleifer, and You w23191 Bubbles for Fama
Hanson and Slaughter w22623 High-Skilled Immigration and the Rise of STEM Occupations in U.S. Employment
Philippon w22476 The FinTech Opportunity
Jordà, Richter, Schularick, and Taylor w23287 Bank Capital Redux: Solvency, Liquidity, and Crisis
Abad, D'Errico, Killeen, Luz, Peltonen, Portes, and Urbano w23280 Mapping the Interconnectedness between EU Banks and Shadow Banking Entities
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us