Journal Article

How Much Nonbank Business Lending Is Indirectly Funded by Banks? Some Evidence from a New Data Set

Abstract: Bank lending to the nonfinancial business sector in the United States has declined in recent decades, accompanied by an increase in credit provision by nonbank financial institutions (NBFIs). At the same time, banks are important providers of funding to the NBFI sector, raising concerns over their exposure to the risk in loans made by NBFIs. This Economic Commentary uses the Federal Reserve’s novel issuer-to-holder data, part of the enhanced financial accounts of the United States, to provide a conservative estimate of the share of lending by NBFIs to nonfinancial businesses that is indirectly financed by the banking sector. Using this method, I find that the additional indirect exposure of banks to business loans through this specific channel has been stable at about 5 percent to 6 percent of all business sector loans over the past 20 years. This share is small when compared to the share of business lending that banks provide directly and does not fully compensate for the decline since 1980 in the share of business lending that banks do directly.

https://doi.org/10.26509/frbc-ec-202613

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2026-06-22

Volume: 2026

Issue: 13

Pages: 10