U.S. Treasury Secretary Janet Yellen warned on Thursday of the potential failure of non-bank lenders if household finances became stretched and the rate of delinquencies on loans rises.
Speaking before a Senate Committee on Banking, Housing and Urban Affairs, the former Federal Reserve chair warned that the risk of failure of one or more of them in the sector was possible if the lending market became strained.
Non-bank lenders rely on short-term funding instruments such as Treasury bills and commercial paper, and they don’t have access to the Fed’s emergency lending facility. Yellen said regulators were monitoring the risks.
She said: “They’re reliant on short-term financing that may be a lot less stable than deposits, and in stressful …
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