JP Morgan has declined to share a detailed breakdown of its lending to non-bank financial institutions, despite a request by US banking regulator to do so by 4 February.
The Federal Deposit Insurance Corporation (FDIC), alongside other financial regulators such as the Federal Reserve, are ramping up scrutiny of banking relationships with the private lending sector due to concerns that they are becoming increasingly co-dependent.
However, according to reporting by the Financial Times over the weekend, unlike most of America’s banks, JP Morgan refused to comply with the FDIC’s request to disclose details of its year-end exposure to such lenders.
Read more: IMF warns on ‘retailisation’ of private credit
The bank, which is the largest lender in the US, listed $133bn (£106bn) lent to non-bank financial institutions under a single category titled “other” in a filing with the FDIC. It did not break down the types of borrowers associated with each loan.
A source told the Financial Times that the bank believed reporting its loan categories in detail to the FDIC placed it at “operational risk”.
“Non-banks have become some of the most important and potentially risky borrowers of the large US banks,” Viral Acharya of New York University’s Stern School of Business told the paper. “Right now the only one who has a picture of how much of a risk this is, it’s the Fed, and only of the banks that it stress tests.”
Read more: Fed’s Cook highlights emerging risks in private credit
Last year, Financial Stability Board Chair Klaas Knot raised concerns that recent “incidents of market stress and liquidity strains” have been linked to non-bank financial institutions.
Knot has been airing concerns over the growth of the so-called shadow banking sector for several years.
Meanwhile, the European Banking Authority’s latest risks report noted the rise of private credit in the bloc, thanks to regulatory changes and the high-interest-rate environment.
Read more: SEC: Private credit market will face greater scrutiny
