Non-bank lending during crises

(February 2023, revised August 2025)

Summary

Focus 

Since the Great Financial Crisis of 2007–09, non-bank financial institutions have steadily increased their global footprint. They now account for around half the global financial system's assets. Recent work on the role of non-banks in mitigating the effectiveness of monetary policy emphasises the importance of their funding models. Much less is known about the behaviour of global non-bank lending during crises, and whether relationships with non-banks benefit borrowers.

Contribution 

Using data from the global syndicated loan market, we provide new cross-country evidence on non-bank lending during financial crises. Previous literature has highlighted the crucial role of lending relationships with banks in alleviating borrowers' credit constraints during crises. We study the importance of lending relationships in shaping non-bank lending.

Findings 

We find that non-banks cut their syndicated credit by significantly more than banks during crises, even after accounting for time-varying lender and borrower characteristics. Further analysis suggests that differences in the value of lending relationships explain most of the lending gap. While having a lending relationship with a bank benefits borrowers, relationships with non-banks – whether measured by duration or intensity – do not improve borrowers' access to credit during crises. The rise of non-banks could therefore exacerbate the repercussions of financial crises, as it leads to a shift from relationship towards transaction lending.

Abstract

For a large sample of countries this paper shows that non–banks curtail their syndicated lending by significantly more than banks during financial crises in borrower countries. Differences in the value of lending relationships explain most of the gap. Relationships with non–banks are less valuable in general and thereby do not improve borrowers' access to credit during crises. Non–banks are also less likely to form lasting relationships with borrowers. These findings imply that the rise of non–banks could increase the importance of transaction–based lenders and exacerbate the repercussions of financial shocks.

JEL classification: F34, G01, G21, G23

Keywords: non-banks, syndicated loans, financial crises, relationship lending, financial stability