BIS Working Paper 1388, published on 20 October 2026, studies US data from 2010–2019. Private credit expanded more in counties with greater pre-reform exposure to banks affected by the LCR. The authors study a historical regulatory change; they do not establish its overall effect on systemic risk. This is research, not a new lending rule.
Event / source publication date: 20 October 2026The following is Human Fintech’s analysis
A smaller bank loan book is not the whole market.
Imagine a company replacing a bank facility with a directly negotiated loan from an investment vehicle. The company still owes money, even though a bank-only measure of credit may now show less lending. Reading financial statistics therefore requires a perimeter: which lenders, which borrowers and which instruments are counted? A change of provider can look like a contraction when only one part of the market is observed.
The reverse mistake is to treat growth outside banks as proof that financing needs are fully met. Replacement funding can differ in price, covenants, maturity and availability. Aggregate growth tells a reader little about the terms faced by a specific borrower. Comparing contracts is a separate task from measuring the size of a market.
Ask whose clock matters.
Consider a hypothetical five-year loan. If its financier must return money to investors at short notice, the borrower’s repayment schedule and the financier’s obligations run on different clocks. If investors have agreed to wait, that particular tension can be smaller. Neither arrangement changes whether the borrower’s business ultimately earns enough to repay. Liquidity and credit quality remain distinct questions.
This distinction is useful when reading a product description that combines illiquid assets with convenient access. What makes access possible: cash reserves, asset sales, committed funding or restrictions on withdrawals? Each answer carries different conditions. A promise of flexibility deserves an explanation of the mechanism, not just a reassuring label.
A historical finding is a starting point.
The paper compares counties with different pre-reform bank footprints and tests alternative explanations. That is more informative than observing that regulation and private credit grew during the same decade. It still does not make every expansion of nonbank lending a regulatory effect, nor does it predict the outcome for another country or a particular portfolio.
The broader reading lesson is to trace obligations rather than stop at institutional categories. Who absorbs a default, who supplies temporary cash, and which commitments could be called at the same time? Those questions help distinguish a genuine change in the structure of financing from a change in where exposures are recorded. They also keep a discussion of market growth separate from an investment recommendation.
White Fintech.
Parts II–III of White Fintech cover lending economics, funding and risk management: a foundation for further reading about the lending business.
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