Report

The Nonbank Footprint of Banks

Abstract: U.S. bank holding companies (BHCs) have developed a significant nonbank footprint over the last five decades, accounting for a sizable share of both BHC assets and the broader nonbank financial sector. We argue that this structure is partly explained by internal capital markets: when affiliates face imperfectly correlated liquidity outflows, internal transfers reduce the need for precautionary buffers. Using unique data on BHC structure and intracompany funding balances, we find evidence that affiliates provide implicit liquidity insurance through internal transfers, and that the BHC organizational scope responds to shocks that affect the value of this insurance. Our findings suggest that internal liquidity insurance plays a central role in determining both firm boundaries and asset allocation in modern financial groups.

JEL Classification: G01; G21; G23; G28;

https://doi.org/10.59576/sr.1118

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2024-09-01

Number: 1118

Note: Revised November 2025.