The Financial Stability Board is calling for stronger oversight of the near $2 trillion private credit market, warning that opaque data, complex fund structures, and valuation practices could create vulnerabilities across banks, asset managers, insurers, and private equity firms. According to CNBC, the G20-backed watchdog pointed to private credit’s growing links with traditional finance through bank credit lines, revolving facilities, and strategic partnerships. The FSB report cited $220 billion of drawn and undrawn bank credit lines to the sector, while commercial data suggests the actual figure could be significantly higher.
The report comes as private credit has moved beyond its earlier focus on middle-market lending into financing for larger companies, with retail investors increasingly gaining exposure through semi-liquid and publicly traded vehicles. The FSB said these linkages could amplify stress in a downturn, particularly because private credit borrowers are concentrated in leveraged sectors such as technology, healthcare, and services. It also flagged increased reliance on payment-in-kind loans, which can indicate that borrowers are under pressure to meet cash interest obligations.
European banks’ exposure to private credit has drawn closer attention during earnings season. CNBC reported that Barclays disclosed $20 billion in private credit exposure, while Deutsche Bank’s position is about $30 billion, equal to roughly 2% of its total loan book. BNP Paribas said its exposure stood at $25 billion, or about 3% of its loan book. The FSB urged national regulators to improve loan-level data, scrutinize liquidity mismatches, and share supervisory approaches on risk management, valuation, private ratings, and governance across banks and non-bank institutions.
