# kaal:claim:3405660-026

**Claim.** Banks can restrain borrower risk taking because they can credibly threaten to cut off future lending, a disciplinary tool other intermediaries lack.

**Type.** mechanism  **Support.** argued

**Holds when.**

- ongoing lending relationship in which future credit matters to the borrower

**Source quote.**

> They have advantages in preventing risk taking by borrowers because they can use the threat of cutting off future lending to improve a borrower's behavior.

**From.** Kaal, *Indirect Regulation of Hedge Funds* (2019), IV.1 Fund Regulation via Banking Supervision, page 20

**Cite as.** Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660

**Verify.** sha256 of source PDF `cf507b1833071765bc13a5605f38c2591582eca85f40869e38b6ff075c04d29d` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202019%20-%20Indirect%20Regulation%20of%20Hedge%20Funds.pdf

**Topics.** systemic-risk, risk-and-incentives, defi

**Keywords.** banking-supervision, borrower-discipline, moral-hazard, lending-relationship

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