TY  - UNPD
A1  - Thiemann, Matthias
A1  - Tröger, Tobias
T1  - It’s the tail-risk, stupid! : precluding regulatory arbitrage in shadow banking with a normatively charged approach to supervision capitalizing on multipolar regulatory dialogues
T2  - SAFE working paper series ; No. 260
N2  - The use of contractual engineering to create channels of credit intermediation outside of the realm of banking regulation has been a recurring activity in Western financial systems over the last 50 years. After the financial crisis of 2007 and 2008, this phenomenon, at that time commonly referred to as ‘shadow banking’, evoked a large-scale regulatory backlash, including several specific regulatory constraints being placed on non-bank financial institutions (NBFI). This paper proposes a different avenue for regulators to keep regulatory arbitrage under control and preserve sufficient space for efficient financial innovation. Rather than engaging in the proverbial race between hare and hedgehog that is emerging with increasingly specific regulation of particular contractual arrangements, this paper argues for a normative approach to supervision. We outline this approach in detail by showing that regulators should primarily analyse the allocation of tail risk inherent in the respective contractual arrangements. Our paper proposes to assign regulatory burdens equivalent to prudential banking regulation, in case these arrangements become only viable through indirect or direct access to an (ad hoc) public backstop. In order to make the pivotal assessment, regulators will need information about recent contractual innovations and their risk-allocating characteristics. According to the scholarship on regulatory networks serving as communities of interpretation, we suggest in particular how regulators should structure their relationships with semi-public gatekeepers such as lawyers, auditors and consultants to keep abreast of the real-world implications of evolving transactional structures. This paper then uses the rise of credit funds as a non-bank entities economically engaged in credit intermediation to apply this normative framework, pointing to recent contractual innovations that call for more regulatory scrutiny in a multipolar regulatory dialogue.
T3  - SAFE working paper - 260 
KW  - shadow banking
KW  - regulatory arbitrage
KW  - principles-based regulation
KW  - credit funds
KW  - prudential supervision
KW  - non-bank financial intermediation
Y1  - 2019
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/51347
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-513479
N1  - Zugl. EBI Working Paper Series ; no. 49
IS  - October 7, 2019
PB  - SAFE
CY  - Frankfurt am Main
ER  -