U.S. Bank Liquidity Rule Linked to Faster Private Credit Growth

A U.S. bank liquidity requirement was associated with faster nonbank lending in counties where affected banks held a larger share of deposits.

Private credit consists of loans made directly to companies by nonbank lenders, including funds and asset managers. It expanded more quickly after 2013 in counties where banks covered by the liquidity coverage ratio held a larger share of deposits in 2012. A 10-percentage-point higher share was associated with about 20% more outstanding private credit in the later period. That estimate compares counties; it does not describe growth across the entire U.S. market.

A one-standard-deviation increase in the same deposit measure was linked to nearly 50% more private credit. Growth was also stronger where covered banks began with larger liquidity shortfalls. Together, those patterns suggest that private funds took on some lending as banks adjusted to the requirement.

The analysis tracks direct loans to U.S. borrowers from the first quarter of 2010 through the end of 2019. It compares 2010–2012 with 2013–2019 and covers 568 counties with private credit activity. Of 6,772 bank holding companies evaluated, 36 were identified as subject to the liquidity coverage ratio.

The study’s post-rule period begins in the first quarter of 2013, when the international standard was revised. U.S. regulators finalized their rule on Sept. 3, 2014, and required full compliance by Jan. 1, 2017. Covered banks must hold high-quality liquid assets against projected net cash outflows during a 30-day period of stress.

The study’s 2019 endpoint limits how much that earlier relationship can explain about subsequent growth. After 2020, greater demand for direct loans from technology companies became another driver. Those companies accounted for 44% of the value of outstanding direct loans to U.S. borrowers in 2025. The rise in technology-related private credit reflects a later phase than the county comparison captures.

Moving loans to private funds does not settle the question of financial stability. Banks can still face exposure through credit lines to private lenders even when the funds hold the loans. The overall risk effect remains unresolved.