regulatory arbitrage
REG-yuh-lah-tor-ee ar-bih-TRAHJ
ˌrɛɡjʊlətɒri ˈɑːrbɪtrɑːʒListen
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Dictionary meaning
the practice by financial institutions of exploiting differences in regulatory requirements across jurisdictions, product categories, or legal entity types to reduce compliance costs, capital requirements, or operational restrictions; common strategies include booking activities in lighter-touch jurisdictions, using shadow banking entities outside prudential perimeters, or restructuring instruments to achieve different regulatory treatment; a persistent driver of financial innovation and a central challenge for international regulatory coordination
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