Private Credit: growing regulatory concerns and the risks for financial institutions

Herbert Smith Freehills Kramer LLP have published an article in Butterworths Journal of International Banking and Financial Law examining the growth in private credit and the regulatory risks arising in the sector.

Private credit has grown into a major source of financing, but its rapid expansion has attracted increasing regulatory scrutiny. Recent reports from the Financial Stability Board, the International Organization of Securities Commission, and the House of Lords identify concerns relating to leverage, opacity, interconnectedness and liquidity within the sector. 

In our article, focusing on the regulatory risks, we examine how these vulnerabilities, particularly borrower credit quality and valuations, liquidity mismatch and concentration risk, may affect financial institutions. We highlight the growing links between private credit, private equity, insurers and banks, and explore the regulatory risks that may arise if these vulnerabilities crystallise during a period of prolonged market stress.

The article can be found here: Private Credit: growing regulatory concerns and the risks for financial institutions. This article first appeared in the October edition of JIBFL. 

This is the first article in a series of two, considering the regulatory and litigation risks arising in the sector. Our second article, due to be published in November 2026, will consider the growing litigation risks for financial services firms.