Authors: Nicola Cetorelli and Saketh Prazad
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The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
The growing role of nonbank financial institutions, or NBFIs, in U.S. financial markets is a transformational trend with implications for monetary policy and financial stability.
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Staff Reports
The Nonbank Footprint of Banks
Number 1118
September 2024 Revised November 2025
September 2024 Revised November 2025
JEL classification: G01, G21, G23, G28
U.S. bank holding companies (BHCs) have developed a significant nonbank footprint over the last five decades, accounting for a sizable share of both BHC assets and the broader nonbank financial sector. We argue that this structure is partly explained by internal capital markets: when affiliates face imperfectly correlated liquidity outflows, internal transfers reduce the need for precautionary buffers. Using unique data on BHC structure and intracompany funding balances, we find evidence that affiliates provide implicit liquidity insurance through internal transfers, and that the BHC organizational scope responds to shocks that affect the value of this insurance. Our findings suggest that internal liquidity insurance plays a central role in determining both firm boundaries and asset allocation in modern financial groups.
Author Disclosure Statement(s)
Nicola Cetorelli
The author, Nicola Cetorelli, declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Saketh Prazad
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author, Nicola Cetorelli, declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Saketh Prazad
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Cetorelli, Nicola, and Saketh Prazad. 2024. “The Nonbank Footprint of Banks Disclosures.” Federal Reserve Bank of New York Staff Reports, no. 1118, September. https://doi.org/10.59576/sr.1118
Cetorelli, Nicola, and Saketh Prazad. 2024. “The Nonbank Footprint of Banks Disclosures.” Federal Reserve Bank of New York Staff Reports, no. 1118, September. https://doi.org/10.59576/sr.1118
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