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Non-banks

Paper Session

Monday, Jan. 4, 2027 2:30 PM - 4:30 PM (EST)

Westin DC Downtown
Hosted By: International Banking, Economics, and Finance Association
  • Chair: John Driscoll, Federal Reserve Board

Compete or Coordinate? Private Credit and the Reorganization of Banking Intermediation

Ly Nguyen
,
Rice University

Abstract

I study how the entry of private credit reshapes bank functions in credit intermediation and the allocation of credit across firms, using novel hand-collected data on private credit investments from SEC filings and the relaxation of leverage constraints on private credit lenders for identification. As private credit expands into small- and middle-market corporate lending, small banks defend their core markets by lowering loan rates, loosening underwriting, and expanding credit to small businesses. In contrast, large banks retreat from direct lending to firms and instead move upstream to supply capital to business credit intermediaries, taking advantage of regulatory arbitrage. By increasing credit market competition and providing firms with more financing options, private credit stimulates local economic activity and improves access to credit, particularly for underserved and financially constrained firms.

Corporate Liquidity Supply from Non-Bank Intermediaries and the Real Effects of Factoring

Victor Orestes
,
University of Pennsylvania
Thiago Silva
,
Central Bank of Brazil
Henry Zhang
,
Chinese University of Hong Kong

Abstract

We show that short-term fluctuations in firms’ ability to convert trade credit receivables into liquidity through factoring have large and persistent real effects, with limited substitution from other financing sources or adjustments in trade credit terms. In Brazil, specialized non-bank intermediaries (FIDCs) securitize receivables and are key providers of working capital financing. Using novel transaction-level data linking factoring, invoices, payments, credit operations, and employment records, we exploit investor inflows to FIDCs in a shift-share design to identify exogenous variation in factoring supply. A one-percentage-point decline in factoring rates increases factoring volumes by 16%, revenues by 6%, and intermediate input expenditure by 4%, with effects persisting for several months. Firms expand permanent employment and demand less temporary labor. A model of corporate liquidity management rationalizes these findings: factoring endogenously transforms production into collateral, tying firms’ real and financial decisions. Model-implied macro-elasticities indicate that lowering economywide factoring spreads by 1 percentage point would raise aggregate output and wages by 0.3 to 0.5 percentage points.

Banks, Non-banks and the Macroeconomy

Marie Hoerova
,
European Central Bank
Alejandro Van der Ghote
,
European Central Bank

Abstract

Are bank- and market-based funding substitutes or complements in the provision of credit? Which type of funding is more sensitive to shocks, and why? To answer these questions, we develop a quantitative general equilibrium model with heterogeneous firms, banks, and market-based financial intermediaries (non-banks). Firms optimally choose between bank loans and market-based funding, while banks and nonbanks differ in their leverage constraints and pricing behavior. Three forces-valuation effects operating through asset prices, selection effects arising from firms’ funding choices, and bank market power operating through endogenous loan markups-jointly determine equilibrium outcomes. We show that market-based funding always contracts as financial conditions tighten, while bank credit is less sensitive and may respond non-monotonically, reflecting banks’ ability to adjust loan markups. Consequently, bank and market-based funding may co-move positively or negatively. These results imply that the transmission of monetary and financial shocks depends in nuanced ways on the relative importance of banks and non-banks in the financial system.

Discussant(s)
Tetiana Davydiuk
,
Johns Hopkins University
Samuel Rosen
,
Temple University
Alexander Vardoulakis
,
Federal Reserve Board
JEL Classifications
  • G2 - Financial Institutions and Services