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NBER Working Papers and Publications
|March 2017||Fintech, Regulatory Arbitrage, and the Rise of Shadow Banks|
with Gregor Matvos, Tomasz Piskorski, Amit Seru: w23288
We study the rise of shadow banks in the largest consumer loan market in the US. The market share of shadow banks in originating residential mortgages nearly doubled from 2007-2015. Shadow banks gained a larger market share among less creditworthy borrowers, with a significant share of loans being originated-to-distribute to GSEs. Difference in difference tests suggest that traditional banks contracted origination activity in markets in which they faced more capital and regulatory constraints; these gaps were partly filled by shadow banks. Shadow banks with predominately online mortgage application process, “fintech” lenders, accounted for roughly a quarter of shadow bank loan originations by 2015. Relative to non-fintech shadow banks, fintech lenders serve more creditworthy borrowers and ...