An article came out regarding excessive US bank lending to shadow banks. Shadow banks are not regulated in the same ways the regular banks are. Examples are hedge funds and mortgage lenders.
Why Shadow Banks Matter
Since shadow banks aren’t under the same regulatory scrutiny, their growing share of commercial bank lending may pose risks to the financial system.
Let’s do some calculations from the latest Federal Reserve data regarding the assets and liabilities of US commercial banks.
Credit Cards and Shadow Banks
By the way, these numbers are seasonally adjusted.
| Table Showing % of Total Loans and Leases in Bank Credit | Jan 31, 2024 |
| Commercial and industrial loans | 22.58% |
| Residential real estate loans | 20.96% |
| Commercial real estate loans | 24.15% |
| Credit cards and other revolving plans | 8.44% |
| Automobile loans | 4.05% |
| Loans to nondepository financial institutions | 8.14% |
Shadow banks fall under the category of “nondepository financial institutions”.
It might be interesting to point out that the amounts of credit cards and revolving plans are similar to the loans to nondepository financial institutions. It’s not an insignificant number.
Two posts you can check out! We did a 2-minute overview of a bank’s balance sheet here. Also, we wrote a post on our own economic/market indicators and graphs! Check out the state of the economy here.