The Financial Stability Board (FSB) has issued its Report on Vulnerabilities in Private Credit, highlighting the rapid growth and increasing sophistication of the private credit industry while cautioning that vulnerabilities within the sector could amplify stress across the broader financial system.
The FSB notes that private credit, now estimated at approximately $1.5–2.0 trillion in assets, remains largely untested through a prolonged economic downturn. The Report identifies several areas warranting close attention, including growing interlinkages between banks and private credit funds; borrower credit quality and valuation concerns; leverage; liquidity mismatches; concentration; and interconnectedness with insurers and private equity firms.
The Report also highlights significant data gaps that complicate the monitoring of these risks and calls for continued analysis of financial interconnections and potential channels through which stress in private credit could spread more broadly.