FRB To Require Detailed Reporting On Nonbank Lenders

Fed Vice Chair for Supervision Bowman said the Board will require the largest banks to report detailed financial information — including assets, income, and leverage — on the nonbank entities they lend to.

In remarks at the Hoover Institution's annual Monetary Policy Conference, Ms. Bowman described the new reporting approach as a policy response to a broad migration of corporate lending out of the banking system. She said that banks supplied 48 percent of corporate lending in 2015 but only 29 percent by 2025. Private credit in the United States has expanded to roughly $1.4 trillion, comparable to the leveraged loan and high-yield bond markets, although it still represents only about 10 percent of total U.S. corporate borrowing.

She said this migration traces back to how the post-crisis capital and liquidity rules were calibrated. While the rules were necessary for safety and soundness, they ended up making it more expensive for a bank to extend a loan directly to a creditworthy corporate borrower than to lend to a private credit fund or other intermediary that in turn lends to the same kind of borrower. The current rules, she said, give banks a structural reason to finance intermediaries rather than the end-borrowers, contributing to an undersupply of bank credit to mainstream corporate clients.

She explained that the Fed currently lacks the data to properly supervise the growing web of connections between banks and nonbank lenders. She said that hedge funds, private equity firms, private credit funds, and business development companies ("BDCs") are all lumped under a single regulatory reporting code, making it nearly impossible to assess concentration risk or calibrate oversight accurately. She said that by requiring the largest banks to report on the nonbank entities they lend to, the Fed can better understand the intertwined regulated and unregulated corners of finance that existing oversight frameworks have failed to account for.

Ms. Bowman also pointed to the FRB's March 19, 2026 Basel III proposal as the agency's direct response to that imbalance. Under the proposal, loans to corporate borrowers that the lending bank itself rates as investment grade would carry a 65 percent risk weight instead of the current 100 percent. The change would shrink the difference between the risk weights applied to loans to nonfinancial businesses and to nonbank financial firms, giving banks a fairer footing to compete with nonbank lenders for top-tier corporate borrowers, without weakening the banking system's overall capital position.

Ms. Bowman said the policy shift was not to remove NDFIs from the credit market but to stop regulation from artificially driving borrowers to them. NDFIs are well suited to lend to smaller and riskier borrowers using long-term capital from institutional investors, she said. BDCs typically charge spreads of at least 400 basis points; large banks generally lend at or below 200 basis points - a gap that reflects the different segments each serves.