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Ref: 7/2026

  • The FSB report highlights that private credit brings benefits but also vulnerabilities, including complex interlinkages with banks, borrower credit quality concerns, and valuation opacity.
  • Private credit has grown rapidly and remains untested in a prolonged economic downturn, with high leverage and concentration in specific sectors potentially amplifying stress.
  • The FSB encourages authorities to close data gaps, harmonise definitions to enhance monitoring, and deepen analysis of financial interconnections and liquidity issues, while sharing supervisory insights.

The Financial Stability Board (FSB) today published a report on financial stability vulnerabilities in private credit. This activity has grown rapidly, to an estimated $1.5-2.0 trillion in assets at end-2024 and is heavily concentrated in a few jurisdictions. Notwithstanding the benefits private credit brings, in the form of tailored finance for companies and diversification for investors, it also embeds several vulnerabilities.

The Financial Stability Board (FSB) today published a report on financial stability vulnerabilities in private credit. This activity has grown rapidly, to an estimated $1.5-2.0 trillion in assets at end-2024 and is heavily concentrated in a few jurisdictions. Notwithstanding the benefits private credit brings, in the form of tailored finance for companies and diversification for investors, it also embeds several vulnerabilities.

Interlinkages with banks: The private credit ecosystem is characterised by deepening interconnections between asset managers, banks, insurers and private equity firms. Banks and private credit funds are connected through financing arrangements and strategic partnerships. Across FSB members, the available data captures direct exposures of around $220 billion of drawn and undrawn bank credit lines to private credit funds, while some commercial estimates range from $270-$500 billion. This range highlights some of the data challenges in private credit. However, there are also potential vulnerabilities from a range of other indirect exposures including through banks providing revolving credit facilities to companies that are simultaneously borrowing from private credit funds and the growing use of synthetic risk transfers.

Borrower credit risks and valuation practices: The report warns that valuation opacity and reliance on private credit ratings can amplify strains in stress. Private credit borrowers typically lack public ratings, creating transparency challenges for market-wide monitoring. Available evidence indicates that borrowers typically have lower credit quality and higher leverage than borrowers observed in comparable public markets. There are some signs of borrower stress as usage of payment-in-kind arrangements has increased and some increases in default rates, albeit from low levels.. The growing use of private ratings, sometimes from lesser-known providers, to facilitate investment by rating-reliant investors (including insurers) also warrants monitoring. Private credit lending is concentrated in a few sectors, notably technology, healthcare, and services, complicating surveillance and increasing the risk that a firm‑ or sector‑specific shock turns into broader market stress.

Concentration, leverage and liquidity issues: Concentration arises from significant exposure to sectors such as technology, healthcare, and services. Leverage is reflected in the presence of opaque, multi-layered structures. Liquidity issues stem from the growing popularity of funds offering redemption options to investors, which may heighten the procyclicality of private credit.

Data gaps: The report warns that data gaps hinder effective oversight of the sector. Differences in definitions across jurisdictions and limited fund‑ and loan‑level information make it hard to assess exposures and potential transmission channels. The report proposes a core set of comparable metrics for authorities to track market size and growth, links with banks and insurers, leverage, liquidity features, concentration, cross‑border activity, and borrower credit quality.

The FSB encourages authorities to:

  • address data challenges, including those related to the lack of granular fund and loan-level data and the absence of harmonised global definitions.
  • Deepen analysis of interlinkages of private credit with private equity and insurers and of liquidity mismatches in private credit funds.
  • Share supervisory approaches on risk management and governance for banks and nonbanks active in private credit, including aggregation of exposures, valuation practices, and the use of private ratings.

Notes to editors

This report forms part of the FSB’s work programme to enhance resilience in nonbank financial intermediation (NBFI). Further details on this can be found in its latest progress report.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Andrew Bailey, Governor of the Bank of England. The FSB Secretariat is located in Basel, Switzerland and hosted by the Bank for International Settlements.