Regulatory Arbitrage

  • During the years leading up to the crisis, there was a substantial amount of regulatory arbitrage between bank holding companies and nonbank institutions (investment banks, GSEs, AIG), as well as between large and small banking institutions, with complex, mega institutions being able to operate with thinner capital cushions than the average community bank. (p6)

2014 0310 - Letter - Sheila C. Bair to Sherrod Brown