The central bank has begun collecting data from banks to get a better idea of how their funding is being used in private credit, Michelle Bowman, the Fed\u2019s vice chair for supervision, told lawmakers.<\/p>\n\n\n\n
The Federal Reserve has launched a new data-collection effort intended to provide more transparency on banks\u2019 lending to the private credit sector, the central bank\u2019s vice chair for supervision, Michelle Bowman, said Thursday.<\/p>\n\n\n\n
Bowman, who was among several regulators to testify Thursday to the House Financial Services Committee, noted the data collection as some lawmakers expressed concern over a lack of information on banks\u2019 exposure to the private credit market.\u00a0<\/p>\n\n\n\n
Rep. Ritchie Torres, D-NY, asked Bowman whether an April letter the Fed sent to U.S. banks inquiring about their financial exposure to private credit was \u201can admission that the Federal Reserve has insufficient visibility\u201d into the full extent of the issue.<\/p>\n\n\n\n
And Rep. Juan Vargas, D-CA, expressed concerns about the interconnectedness between private credit and the rest of the financial system, and the \u201cgap in data\u201d that surrounds it.<\/p>\n\n\n\n
Bowman said \u201ca number of opacities\u201d exist between bank involvement and where funding ends up in the nonbank space.<\/p>\n\n\n\n
\u201cThis is an important issue that we\u2019ve been looking very deeply into and trying to work with our regulated financial institutions to get a better sense of what the bank investment is into the private credit space,\u201d she said. \u201cSince it\u2019s quite opaque, it\u2019s difficult to know.\u201d <\/p>\n\n\n\n
The Fed introduced the data-collection effort last month \u201cto understand exactly where those investments are going outside of the banking system,\u201d Bowman said.<\/p>\n\n\n\n
That should afford more transparency and specificity on how bank funding is being used in the private credit space, she said, adding it hopefully will \u201cprovide us with a much better view on where the vulnerabilities might lie.\u201d<\/p>\n\n\n\n
\u201cWe have seen a rise in the investment from banks into NBFIs in particular, but it\u2019s been very difficult for us to have a clear understanding of where those funds have been flowing,\u201d she said.<\/p>\n\n\n\n
Moody\u2019s has estimated U.S. banks\u2019 private credit exposure is about $300 billion, as part of more than $1.2 trillion in loans extended to non-depository financial institutions broadly. The private credit market is about $2 trillion globally, the Financial Stability Board said last month.\u00a0\u00a0<\/p>\n\n\n\n
When Vargas pressed Bowman on whether private credit poses a problem, given the mushrooming size of that market, she said it\u2019s still a \u201cvery small proportion of the lending categories within the banking system.\u201d<\/p>\n\n\n\n
\u201cBut it is something that we need to know more about because it\u2019s very opaque, which is exactly why we\u2019re asking for more information from our regulated institutions,\u201d she added. <\/p>\n\n\n\n
Bowman referenced \u201cbankruptcies and challenges last fall with several private credit funds,\u201d due to poor collateral management, fraud or lack of clear disclosures. <\/p>\n\n\n\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
The central bank has begun collecting data from banks to get a better idea of how their funding is being used in private credit, Michelle Bowman, the Fed\u2019s vice chair for supervision, told lawmakers. The Federal Reserve has launched a new data-collection effort intended to provide more transparency on banks\u2019 lending to the private credit […]<\/p>\n","protected":false},"author":2,"featured_media":57,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-56","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking-credit"],"_links":{"self":[{"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/posts\/56","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=56"}],"version-history":[{"count":1,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/posts\/56\/revisions"}],"predecessor-version":[{"id":58,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/posts\/56\/revisions\/58"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=\/wp\/v2\/media\/57"}],"wp:attachment":[{"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=56"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=56"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/law.petpolicyadvisors.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=56"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}