The Commercial Real Estate Alpha Site

A recent report disclosed that over the past five years, U.S. banks have increased their lending to private credit funds by 145%, reaching approximately $95 billion by the end of 2024. This shift reflects a strategic move by banks to engage with non-bank financial institutions (NBFIs), such as private credit funds, which offer more favorable capital treatment under current regulatory frameworks. By lending to these entities, banks can reduce their capital requirements while still participating in corporate lending indirectly.

As private credit grows into a $1.7 trillion industry, this backdoor leverage is drawing attention from regulators. While banks benefit from lower capital requirements by lending to funds instead of borrowers, the rising exposure raises concerns about hidden risk in the system. It’s a reminder that even as banking rules evolve, financial innovation keeps drawing traditional lenders back into the fold—just in more opaque ways.