Though these cross-holding limits are primarily designed to ensure that the capital of banks and financial institutions is contributed largely by investors outside the financial system, reduction in inter-connectedness is also a collateral objective. (iv)  In order to contain regulatory arbitrage, banks’ exposure to NBFCs is subject to tight limits and NBFCs have been increasingly subjected to more stringent prudential regulations.
(2015), “The Two Faces of Cross-Border Banking Flows”, Bank for International Settlements, December  6/6  BIS central bankers' speeches