[Current Affairs Terms]Non-Depository Financial Institutions (NDFIs) in the United States

◆ Non-Depository Financial Institutions (NDFIs) in the US

Non-Depository Financial Institutions (NDFIs) refer to financial entities in the United States that do not accept deposits. They are distinguished from traditional banks, which take deposits and extend loans.

According to CNBC, the size of the NDFI sector has structurally expanded since US regulators imposed restrictions on banks handling high-risk loans in the aftermath of the 2008 financial crisis.

Recently, concerns have been raised over a sharp increase in credit creation by NDFIs.

Moreover, as banks are reportedly providing large-scale funding to NDFIs, there are growing fears that credit risks originating from NDFIs could spill over into the banking sector.

Wall Street recently experienced an event that briefly heightened concerns over credit risks stemming from NDFIs. With tariffs weighing on the US real economy and weakening the labor market, there are worries that high-risk loans extended by NDFIs could deteriorate, potentially triggering a credit crisis.

Last month, auto financing company Tricolor and auto parts manufacturer First Brands both filed for bankruptcy.

This month, regional lender Zions Bancorporation (NASDAQ: ZION) recognized a $50 million loss on commercial and industrial loans handled by its subsidiary, California Bank & Trust. These loans are believed to have originated in the NDFI sector.

Another regional bank, Western Alliance Bancorporation (NYSE: WAL, WAB), also announced it was unable to exercise senior collateral rights against Cantor Group.

Jamie Dimon, Chairman of JPMorgan Chase, referenced the bankruptcy of First Brands during a recent conference call, saying, "If you see one cockroach, there are likely to be more," expressing his concerns through analogy.

(Seoul=Yonhap Infomax) Eun Byul Yun

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