The shadow lending market is growing as tighter regulations force the major banks into tighter controls. The Bank of Canada raised concern on the growth of unregulated lenders, sometimes attached to the pay-day loan sector, last year and now an economist from CIBC World Markets has expressed his doubts. Benjamin Tal told The Financial Post
that increased regulations on the major lenders is likely to increase the margin between them and the shadow market. He explained: “If you are a regulator, and you are imposing more and more regulations on those that are regulated, those financial institutions cannot do all the business that they want to do.” That, he said, would push more borrowers towards the unregulated sector and increase the risk in Canada’s credit profile. Read the full story.