Moody's: The surge in lending by the U.S. banking industry to private credit institutions may pose risks

Moody's stated in a report that loans from U.S. banks to private credit institutions have surged to nearly $300 billion. The agency warned that if underwriting standards weaken, smaller lending institutions may face greater risks. The report noted that loans to non-depository financial institutions currently account for 10.4% of total bank loans, nearly three times the 3.6% from a decade ago. It also added that this rapid growth momentum has outpaced all other lending activities since 2016. In recent weeks, some regional banks, including Zions Bancorp, have encountered issues with non-performing loans and alleged fraud, raising investor concerns about broader tensions in the financial industry. Moody's indicated that, in addition to the risk exposure to private credit institutions, as of the end of June, there were $285 billion in loans provided to private equity funds, and these borrowers also had $340 billion in unused loan commitments. Analysts believe that the recent situation is a special event and not a systemic issue regarding credit quality. Banking executives have also downplayed the risks of private lending