Securities-backed lending swells to $5.4 trillion, Deloitte survey finds

what happened

Deloitte, in a survey of 57 major private banks and other lenders that The Wall Street Journal reviewed, estimates that about $5.4 trillion is extended against securities, mostly stock and bond portfolios but also funds and crypto. The market has grown quickly as global wealth flows into equities and asset prices climb, averaging 12% annual growth over the past decade. There is no central tally, and banks do not always break such lending out on their balance sheets.

The United States accounts for roughly 30% of the market, while Switzerland and Liechtenstein together hold about 12%. Actual borrowing is lower, since clients often leave credit lines undrawn; Deloitte puts drawn balances near $1.6 trillion. Margin lending, where investors borrow to buy more assets with less cash, has climbed sharply this year. Around 45% of credit lines exceed $2.5 million.

Lenders like the product because approvals are fast, often without deep personal credit checks, and pricing follows a standard formula based on the collateral's market value and liquidity. Deloitte says the average loan-to-value ratio is about 50%, and borrowers typically pay roughly 1 percentage point above benchmark rates. For family-run Swiss private banks, such loans can generate 25% to 30% of annual profit.

The product is also reaching less wealthy clients. Charles Schwab said its pledged asset line, open to clients with at least $100,000 in non-retirement assets, drove a 35% jump in bank-loan balances to $72.3 billion in the third quarter. Monument Bank in the UK plans to start portfolio lending early next year. Deloitte also found some banks specializing in crypto, sometimes lending as much as 90% against it, with one consultant saying lenders move "immediately" when liquidating.

why it matters

Because these loans are secured by portfolios, a market downturn can force sales of pledged stock, bonds or crypto, adding pressure to prices. Regulators have warned that borrowers must understand this risk and the potential tax consequences.

market impact

US stocks and crypto: forced sales of pledged collateral could add pressure during a market downturn

tags

instruments