Rise in loans to US non-bank financial groups raises systemic risk fears

US bank lending to buyout firms and private credit groups has helped fuel a steep rise in loans to non-bank financial institutions. Regulators have asked banks to disclose more information about their relationships with so-called NBFIs. The IMF warned in its Global Financial Stability Report last month that increased lending by banks “could make the financial system more vulnerable to high levels of leverage and interconnectedness” But Fitch report states that for now a downturn in the private credit sector is “unlikely to have widescale financial stability implications for the largest banks’“. It cautions that it is difficult to fully assess the risks and that “second order effects are more difficult to quantify’.

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