Private credit’s $2 trillion boom raises global stability fears, watchdog warns

A screen is seen on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. Andrew Kelly | Reuters A global finance watchdog is demanding national regulators better scrutinize private credit, warning that banks, asset managers, insurance and private equity firms are exposed to an assortment of growing risks in the near $2 trillion sector. In a wide-ranging study published Wednesday, the Financial Stability Board said the industry's lack of standardized, transparent data, along with opaque valuation practices and complex funding structures and vehicles, is bringing vulnerabilities to broader markets. It comes amid growing jitters surrounding private credit in the U.S. — spanning software exposures , business development companies , and individual corporate blow-ups . The FSB — which is made up of central bankers, regulators and finance ministers from the G20 countries — sounded the alarm on the sector's increasing interconnectedness with banks, insurance companies and investment managers through bank credit lines, revolving facilities and strategic partnerships. The FSB's statistics showed $220 billion of drawn and undrawn credit lines from banks but commercial data suggested the amounts could be twice as large. While that's a relatively small share of banks' total CET1 capital, other linkages could heighten risks, the FSB said. …