This paper shows that the contractual features governing bank lending to nonbank lenders (NBLs) are a key source of financial stability. I document that credit lines account for 90% of bank funding to NBLs in the syndicated loan market. NBLs use credit lines to manage investment and liquidity shocks, while banks’ liquidity advantage makes them natural insurers. To study the financial stability and welfare implications of this arrangement, I develop a quantitative model with endogenous credit limits and fees between banks and NBLs. Credit lines generate insurance revenues for banks that fund loan origination, reinforcing deposit creation. Credit lines’ contingent features make them cheaper but riskier than cash, and safer but more costly than loans. Quantitatively, credit lines raise welfare by 0.02% relative to cash and 1.83% relative to loans. Yet, deposit insurance induces banks to extend limits beyond the social optimum, making moderate tightening of capital and off-balance-sheet requirements welfare-improving. In contrast, partial guarantees to NBL debt weaken banks’ relative liquidity advantage, constrain credit line supply, and reduce welfare, underscoring the importance of bank credit lines to NBLs for financial stability.