Global debt grew by US$8.3 trillion in the March 2023 quarter to a near-record US$304.9 trillion – a surprisingly strong annualised growth rate of 11.2 per cent at a time when interest rates were rising. The Institute for International Finance released its March quarter Global Debt Monitor, warning that growing debt levels mixed with financial strain in some parts of the global banking industry could signal a coming credit crunch. Among the sectors analysed in the report, household and non-financial corporate debt fell year-on-year, while government and financial sector debt rose. Another worrying sign for the IIF was that emerging markets debt reached a record high of US$100.7 trillion. The biggest increases in borrowing were in China, Mexico, Brazil, India and Türkiye. The IIF said non-bank financial institutions have been a bigger presence in the global debt market over the past year. It estimates that “shadow banking” now accounts for about 14 per cent of debt market activity, regaining most of the ground the sector lost after the 2008 financial crisis. It said the expansion is a result of the investment management industry getting more involved in private debt markets.  Lenders backed by investment managers are changing the way they do business. IIF said that in the years from 2007 to 2014 most of their work was buying distressed debt, providing mezzanine funding and backing big real estate projects. Now the main part of their business is origination. IIF said: “We expect that ongoing pressure on US regional banks will facilitate the continued expansion of private debt markets.” The report also detailed a big cut-back in bank ESG lending, which had been rising strongly in recent years. Issuance fell 15 per cent year-on-year to US$285 billion in the March quarter.