Private credit firms are facing a major test
Mom-and-pop investors pulling their cash in fear of corporate defaults spiking and artificial intelligence destroying many of the software businesses that these funds have lent to.
Michelle Bowman, the Federal Reserve board member in charge of regulation, said banks should have the flexibility to compete.
“Nonbank financial institutions continue to increase their share of the total lending market, creating strong competition for regulated banks without facing the same prudential standards,” she told the Senate banking committee on Thursday.
After the financial crisis of 2008, banking rules were overhauled to stop deposit-funded lenders betting on markets or directly lending to most high-risk borrowers.
All nonbanks combined now hold more assets than all banks.
One major concern is that this shadow banking sector, as it is known, has turbocharged its impact on the economy by borrowing from traditional lenders, too.
In the US, bank loans to nonbanks have been the fastest-growing form of lending for years and hit nearly $2 trillion this month.
Paul J. Davies bloomberg Mrch 2, 2026
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