Financial Regulation
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Regulatory Arbitrage
The redesign of transactions, entities, or instruments to obtain a more favorable regulatory treatment while preserving much of the same economic exposure.
Why It Matters
Regulatory arbitrage can undermine rule-based regimes, move risk outside supervised institutions, and force lawmakers to compare activity-based, entity-based, and functional regulation.
Selected Literature
A short list of directly relevant archive entries.
1997
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2010
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Regulating the Shadow Banking System
Gary Gorton and Andrew Metrick
Brookings Papers on Economic Activity
2019
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Related Cases
2007
Financial Law
Watters v. Wachovia Bank, N.A.
550 U.S. 1 (2007)
National bank operating subsidiaries, state licensing, and federal supervisory authority.
1996
Financial Law
United States v. Winstar Corp.
518 U.S. 839 (1996)
Government contractual commitments made during thrift supervisory mergers and later regulatory change.