The “fastest-growing loan segment” – lending to nondepository financial institutions (NDFIs) – expanded at a compounded annual rate of 21.9% from 2010 to 2024, nearly three times as fast as the next fast-growing segment, a Wednesday report from the federal bank deposit insurance agency said.
According to the Federal Deposit Insurance Corp.’s (FDIC) report “Bank Lending to Nondepository Financial Institutions” (part of the agency’s “Banking issues in Focus” series), lending to NDFIs was the fastest-growing segment of banking lending since the 2008-09 financial crisis.
The FDIC defines NDFIs as “financial entities that lend to consumers and nonfinancial companies and provide other types of financial services like insurance and transactions services.” Those includes, the agency said, mortgage lenders, finance companies, insurance companies, private equity funds, private credit funds, broker-dealers, and asset-backed securities issuers.
The report contends that NDFIs, unlike banks and credit unions, are not chartered insured depository institutions and do not accept deposits.
The report also states that:
- The NDFI share of the financial sector has not grown since 2000, but the composition of NDFI assets has shifted.
- Bank lending to NDFIs have lower delinquency rates than similar loans to businesses not secured by real estate.
- Recently added Call Report fields show that more than half of bank lending to NDFIs is to credit intermediaries, and about a quarter is to private equity funds.
Bank Lending to Nondepository Financial Institutions
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