• Thu. Feb 29th, 2024

Banks Embrace Shadow Banks, Amidst Regulator Concerns over Systemic Risks


Feb 13, 2024
Less Regulated ‘Shadow’ Lenders Receive $1 Trillion in Loans from US Banks

US banks have strengthened their ties with alternative asset lenders, despite regulators’ concerns over potential systemic risks associated with these less regulated “shadow banks.” In January, the amount of loans made by US banks to shadow banks surpassed $1 trillion, representing a roughly 12.16% year-over-year surge from January 2023, according to data released by the US Federal Reserve. This growth in lending has raised concerns about potential systemic risks and loosely regulated financial institutions exposing banks to lower-quality loans. However, experts argue that such institutions have provided an important source of financing for non-bank lenders and contributed to the growth of banking as a whole.

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