Bank liquidity rules drive private credit growth
Private credit grew more in US counties exposed to banks facing liquidity requirements, finds Bank for International Settlements (BIS) research published October 19, 2026. A 10-percentage-point larger bank footprint implied 20 percent more private credit.
Liquidity constraints redirect corporate lending
Sebastian Doerr, Gaston Gelos and Vesa Pursiainen examine how the liquidity coverage ratio (LCR) affected private credit using PitchBook loans from Q1 2010 through Q4 2019.
Their sample includes 568 counties with private credit and 6,772 bank holding companies, including 36 subject to the LCR.
A difference-in-differences design compares counties using banks' 2012 deposit shares and initial liquidity shortfalls.
Greater exposure predicts faster private credit growth after Q1 2013, with no differential pre-trends.
A one-standard-deviation larger LCR-bank footprint implies nearly 50 percent higher volumes.
Effects are comparable in magnitude to those associated with capital requirements from the 2012 stress tests.
Illiquid borrowers drive the substitution
The US framework covered banks above $50 billion in assets, requiring ratios of 70 percent below $250 billion and 100 percent above it against 30-day stressed net outflows.
The US proposed its rule in October 2013, finalized it in September 2014 and set December 2017 as the compliance deadline.
Effects are stronger in credit-dependent industries and those with less redeployable assets.
Leveraged loans and buyout private credit show no statistically significant response.
Results withstand alternative reform dates, loan measures and local banking controls.
Risk moves beyond bank balance sheets
The authors argue that evaluating liquidity rules requires looking beyond banks to nonbank resilience.
Traditional funds lock capital in for five to eight years against loans averaging about five years, reducing maturity transformation.
They caution that leverage, semi-liquid funds and bank credit lines complicate systemic-risk conclusions.