XXVI Edition

14-15-16 December 2017"

Impact of regulations and other factors on driving the role of Shadow Banking System in supplying credit. Evidence from International Data

SAID Zeinab, University Grenoble Alpes

This paper presents an approach to understand the key determinants of the shadow banking system. We use loans originated from the shadow banking system to account for the size of shadow banking in the economy. In other words, we focus on examining the factors that might have an influence on the role of the shadow banking system in supplying credit. We use a yearly panel data set of 28 countries over the 1990-2013 periods. Overall, we find that shadow banking loans are influenced positively by (i) the share of other financial institutions in the financial system, (ii) the increasing role of insurance companies and pension funds; and negatively by the ratio of non-performing loans. We also find no general evidence of an important interaction between the credit supply of the shadow banking system and most of the regulatory and supervisory variables. On the other hand, we find that bank loans are strongly influenced by the role of institutional investors and most of the regulatory variables are statistically significant.

Area: Banking

Keywords: Credit Supply, Shadow Banking, Traditional Banking, Regulatory Arbitrage.

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