Source: Fortune
Summary
The Federal Reserve is asking major US banks about their exposure to private credit, following a surge in redemptions and a rise in troubled loans in the industry. The Fed is seeking details on the debt private credit funds have taken on from banks, which could expose banks to losses if the industry experiences stress. The Treasury Department is also questioning the insurance industry about exposures to private credit. Regulators are working to get a handle on the scale of the strains in private credit, which has grown to an $1.8 trillion industry.
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The Fed is taking a closer look at private credit, an industry that has grown rapidly and is now on regulators’ radar. The central bank is seeking details on the debt private credit funds have taken on from banks, which could expose banks to losses if the industry experiences stress. The Treasury Department is also questioning the insurance industry about exposures to private credit. JPMorgan Chase’s Jamie Dimon has warned about the lack of transparency and poor valuation standards in the private credit industry. The Fed’s questioning comes as President Trump’s top financial watchdogs seek to loosen rules for Wall Street lending giants.
The strategy enters a familiar phase: when regulators start asking questions, it’s time to reassess the risk.
Author: Evan Null
