Across the executive branch, regulators are growing more vocal in discussing the systemic risks that non-bank financial institutions (NBFIs) pose. Why now? According to Bloomberg, the nonbank mortgage-servicing task force of Financial Stability Oversight Council (FSOC) will release its recommendations imminently—most likely next month—which will offer the foundations for NBFI-focused rulemaking.

Treasury Secretary Janet Yellen was perhaps the most prominent government official to discuss these developments in the past week. At the Senate Banking Committee on Thursday, Yellen justified the FSOC’s actions as a timely response to an acute vulnerability—emphasizing the 2008-esque redux that could emerge through the failure of mortgage-focused NBFIs. “FSOC is very focused on that because nonbank mortgage companies lack access to deposits, which banks have,” Yellen said. 

Just a day later, the US Federal Reserve shared that US banks had more than $1T in outstanding loans to NBFIs—an amount 20 times higher than it was in 2010. To acting head of the Office of the Comptroller of the Currency Michael Hsu, this growing phenomenon encourages regulated lenders to compete with NBFIs by taking on riskier loans. “We need to solve for the race to the bottom,” he said. “And I think part of the way to solve it is to put due attention on those non-banks.”

(FDIC Chairman Martin Gruenberg has shared similar sentiments, as has José Manuel Campa, Chair of the European Banking Authority.)

These new rules will most likely oblige banks to share more granular information about the kinds of NBFIs they lend to. Are they extending loans to hedge funds, private credit solutions, fintechs, or other kinds of corporate entities? And that information-sharing obligation may partially be passed onto fintechs as a way for banks to reduce overhead while also mitigating risk. 

These new rules—an attempt to prevent major government intervention as seen in 2008, 2020, and even 2023—may also create a market opportunity for compliance-focused tech. Reporting tools and solutions streamlining bank-NBFI interfacing could become increasingly useful. In a holding pattern before more textured rulemaking emerges, these solutions may ramp up quickly by the end of the year.