In a speech at the Hoover Institution Annual Monetary Policy Conference, Federal Reserve Board Vice Chair for Supervision Michelle Bowman outlined a three-part approach that she said the Federal Reserve is taking to the migration of corporate lending from banks to nonbank financial institutions. She argued that some post-crisis capital rules have become disproportionate to risk and now make lending to private credit funds more attractive for banks than lending directly to creditworthy companies, pushing activity outside the regulated banking system. Her framework combines recently proposed capital recalibration for traditional bank lending, preservation of a role for private credit and business development companies, and more granular supervisory reporting on bank exposures to nondepository financial institutions. Bowman said the bank share of corporate lending fell from 48 percent in 2015 to 29 percent in 2025, while the United States private credit market grew to about USD 1.4 trillion, or roughly 10 percent of overall corporate borrowing. Under the recent Basel III proposal, the risk weight for corporate exposures that the lending bank deems investment grade would generally fall to 65 percent from 100 percent, narrowing the gap with loans to nonbank financial corporations. She also said the Board will update regulatory reporting so the largest banks report financial information on nondepository financial institution borrowers, including total assets, net income, and leverage, to improve concentration analysis, supervision, stress test calibration, and capital planning. Bowman added that recent private credit bankruptcies and redemptions among some BDCs have raised concerns, even though banks' lending to BDCs and other private credit vehicles has continued to grow and generally appears well collateralized.
Federal Reserve Board 2026-05-08
Federal Reserve Board Vice Chair Bowman outlines 65 percent risk weight proposal and new reporting to address corporate lending migration to nonbanks
Federal Reserve Vice Chair for Supervision Michelle Bowman outlined a three-part approach to the shift of corporate lending from banks to nonbank financial institutions: recalibrating capital for traditional bank lending, preserving a role for private credit and business development companies, and enhancing supervisory reporting on bank exposures to nondepository financial institutions. She noted banks’ share of corporate lending fell from 48 percent in 2015 to 29 percent in 2025 as the U.S. private credit market grew to about USD 1.4 trillion. Bowman said the Basel III proposal would cut risk weights on investment-grade corporate exposures to 65 percent from 100 percent and that the largest banks must report detailed financial information on nondepository financial institution borrowers, citing concerns from recent private credit bankruptcies and business development company redemptions.