Discussion Paper

U.S. Banks Have Developed a Significant Nonbank Footprint

Abstract: In light of the rapid growth of nonbank financial institutions (NBFIs), many have argued that bank-led financial intermediation is on the decline, based on the traditional notion that banks operate to take in deposits and make loans. However, we argue that deposit-taking and loan-making have not accurately characterized U.S. banking operations in recent decades. Instead, as we propose in this post, absent regulatory restrictions, banks naturally expand their boundaries to include NBFI subsidiaries. A significant component of the growth of NBFIs has in fact taken place inside the boundaries of banking firms.

JEL Classification: G01; G21; G23; G28;

https://doi.org/10.59576/lse.20251118a

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2025-11-18

Number: 20251118a