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Less Regulated ‘Shadow’ Lenders Receive $1 Trillion in Loans from US Banks


Feb 13, 2024

US banks on Wall Street have been providing $1 trillion in loans to non-regulated “shadow banks,” leading to increased exposure to higher-risk debt, regulators say. Major banks such as Citigroup and Wells Fargo have strengthened their connections with alternative asset lenders. According to data from the US Federal Reserve, loans to non-depository financial entities reached over $1 trillion in January, a 12.16% year-over-year increase from January 2023. This has raised concerns among regulators about potential systemic risks.

These shadow banks are less regulated and often lend to enterprises with higher potential returns but also higher risks. Financial experts have warned that banks are taking on lower-quality loans by increasing lending to these loosely regulated financial institutions. Since 2010, the share of financing to shadow banks has reached 6% of all bank lending, more than auto lending and not far below credit card debt. This has made shadow banking one of the fastest-growing businesses in the banking industry, raising concerns about the potential risks involved.

By Editor

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