Chart of the Week
The Federal Reserve publishes weekly data on loans issued by banking institutions. The credit boom between 2020 and 2022 gave way to a contraction at the end of 2023, which is generally a negative signal for the US economy. Since early 2024, bank lending has picked up again, but it is interesting to note that the beneficiaries of this growth are to be found among other financial institutions.
In early 2025, the Fed instructed banks to reclassify their loans to better capture lending to these financial institutions — including insurers, private equity funds, hedge funds, brokers, investment funds, and other financial vehicles. Loans secured by securities were also moved into the “other loans” category.
Historical data has not been adjusted, which explains the jump at the beginning of 2025 that disrupts the reading of this statistical series. Even so, the new classification reveals that since the beginning of the year, 92% of new bank loans have gone to finance non-bank financial institutions — far outpacing lending to businesses or households.
OUR ANALYSIS
The data does not indicate which players contributed most to the growth in credit, nor the maturity profile of these loans. Research shows that banks have significantly increased their lending to private debt funds, while figures from the Office of Financial Research reveal a sharp rise in hedge fund leverage over the past two years. Together, these trends have likely fueled the surge in U.S. asset prices, raising concerns about the risk of market adjustment.
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Written on October 10 2025. Opinions subject to change.
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