Regulating Banks in the Era of Shadow Banks · 2019. 7. 3. · Regulating Banks in the Era of...
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Regulating Banks in the Era of Shadow Banks Amit Seru Stanford GSB, Hoover and NBER Andrew Crockett Memorial Lecture June 30, 2019
Transcript of Regulating Banks in the Era of Shadow Banks · 2019. 7. 3. · Regulating Banks in the Era of...
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Regulating Banks in the Era of Shadow Banks
Amit SeruStanford GSB, Hoover and NBER
Andrew Crockett Memorial Lecture June 30, 2019
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20%
30%
40%
50%
60%
70%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RISE OF SHADOW BANKS
Dramatic Change in Lending LandscapeShadow bank share in the US personal loan market
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20%
30%
40%
50%
60%
70%
1996
1997
1998
1999
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2002
2003
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2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
RISE OF SHADOW BANKS
Dramatic Change in Lending LandscapeShadow bank share in the US residential mortgage market
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Dramatic Change in Lending over last DecadeRISE OF SHADOW BANKS
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RISE OF SHADOW BANKS
Dramatic Change in Lending LandscapeType Mar ket size % in side
banking system % in banking system at risk
Select disruptors
Personal Loans $843bn 81 31 Lending Club, Prosper
Small Business Loans $186bn 95 100 On Deck, Kabbage
Leveraged Loans $832bn 7 34 Alternative AM, BDCs
Student Loans $1,222bn 5 100 SoFi, Earnest
Mortgage Loans $1,169bn 58 100 Quicken, PFSI, Freedom
CRE Loans $2,354bn 56 9 Commercial REITs
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RISE OF SHADOW BANKS
Dramatic Change in Lending Landscape
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RISE OF SHADOW BANKS (EU)
Dramatic Change in Lending Landscape
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RISE OF SHADOW BANKS (CHINA)
Dramatic Change in Lending Landscape
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REGULATION?
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County Level Shadow Bank Share: 2008
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County Level Shadow Bank Share: 2015
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Change in Shadow Bank Share and RegulationCHANGE IN SHADOW BANK SHARE AND REGULATORY PRESSURE
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TECHNOLOGY?
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Technology?
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Quicken Loans
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Technology? Faster ProcessingTIME TO SELL
0
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016 2017
Traditional Lender Quicken Loans
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Technology? Leveraging Credit InformationREFINANCING PERCENT
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20170
10
20
30
40
50
60
2010 2011 2012 2013 2014 2015 2016 2017
Traditional Lender Quicken Loans
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Technology? Other Data% DECLARED WHITE
40
45
50
55
60
65
70
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 20170
10
20
30
40
50
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2010 2011 2012 2013 2014 2015 2016 2017
Traditional Lender Quicken Loans
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Technology? Quality
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Technology? Willingness to Pay
3.50
3.75
4.00
4.25
4.50
4.75
5.00
5.25
2010-Q1
2010-Q2
2010-Q3
2010-Q4
2011-Q1
2011-Q2
2011-Q3
2011-Q4
2012-Q1
2012-Q2
2012-Q3
2012-Q4
2013-Q1
2013-Q2
2013-Q3
2013-Q4
2014-Q1
2014-Q2
2014-Q3
2014-Q4
2015-Q1
2015-Q2
2015-Q3
2015-Q4
INTEREST RATES ON LOANS
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INTEGRATED INTERMEDIATION
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BUSINESS MODEL
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Where are the loans?TRADITIONAL BANKS
0%
10%
20%
30%
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50%
60%
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80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Not Sold/Affiliate GSE Private Securitization Bank Insurer Other
Retained
Sold to GSEs
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Bank Capitalization and Balance Sheet RetentionACROSS LENDERS WITHIN LENDERS
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Where are the loans?SHADOW BANKS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Not Sold/Affiliate GSE Private Securitization Bank Insurer Other
Sold to GSEs
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INDUSTRIAL ORGANIZATION
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TRADITIONAL BANK MARKET SHARE
Penetration of Shadow Banks Not Uniform
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Market Segmentation and FinancingTRADITIONAL BANK MARKET SHARE BALANCE SHEET FINANCING
0%
20%
40%
60%
80%
100%
0.8 0.85 0.9 0.95 1 1.05 1.1 1.15 1.20%
20%
40%
60%
80%
100%
0.8 0.85 0.9 0.95 1 1.05 1.1 1.15 1.2
Easy to securitize Hard to securitize Easy to securitize Hard to securitize
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EQUILLIBRIUM
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Not in the data
Funding Costs?Banks Lose Market Share
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Regulation?Banks Lose Market Share
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Not in the data
Funding Costs?FinTech Gain Market Share
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Quality?FinTech Gain Market Share
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COUNTERFACTUALS
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0
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4.50% 6% (Baseline) 7.50%
Shadow Bank GSE Conforming Bank GSE Conforming
Bank Balance Sheet Conforming Bank Balance Sheet Jumbo
CAPITAL REQUIREMENTS 6% à 7.5%
Lender Loan TypeFinancing
Source ChangeTotal - - -$13b
Bank Jumbo Portfolio -$38b
Bank Conforming Portfolio -$204b
Bank Conforming GSE +$215b
Shadow Bank Conforming GSE +$14b
LENDING VOLUMES ($B)
Bank
GSE
BalanceSheet
Jumbo
GSE
C
on
fo
rm
in
g
Counterfactuals: Capital Ratios
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LENDING VOLUME CHANGES ($B)
Counterfactuals: Capital Ratios
-$250
-$200
-$150
-$100
-$50
$0
$50
3% 4.5% 6% 7.5% 9% 12%
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Counterfactuals: Capital Ratios
-$250
-$200
-$150
-$100
-$50
$0
$50
3% 4.5% 6% 7.5% 9% 12%
With shadow banks
Without shadow banks
Shadow banks“dampen” the response
LENDING VOLUME CHANGES ($B)
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-10bps +0bps (Baseline) +10bpsShadow Bank GSE Conforming Bank GSE ConformingBank Balance Sheet Conforming Bank Balance Sheet Jumbo
Counterfactuals: QEGSE FINANCING COST -10BPS LENDING VOLUMES ($B)
GSE
BalanceSheet
JumboLender Loan Type
Financing Source Change
Total - - +$61b
Bank Jumbo Balance Sheet -$4b
Bank Conforming Balance Sheet -$357b
Bank Conforming GSE +$389b
Shadow Bank Conforming GSE +$33b
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Counterfactuals: QE
-$400
-$200
$0
$200
$400
$600
$800
-100bps -25bps -10bps Baseline +10bps +25bps +100bps
Without shadow banks
LENDING VOLUME CHANGES ($B)
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Counterfactuals: QE
-$400
-$200
$0
$200
$400
$600
$800
-100bps -25bps -10bps Baseline +10bps +25bps +100bps
Without shadow banks
With shadow banks
Shadow banks“amplify” the response
LENDING VOLUME CHANGES ($B)
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IMPLICATIONS
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InterlinkagesTYPICAL SHADOW BANK BALANCE SHEET
A L
Cash =10 ST Debt from Banks = 75Equity = 25Mortgages for Sale =70
MSR =15IT =5
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