Why is private credit growing so fast? Is it a risk to financial stability?

Private credit (also known as direct lending) is lending by non-bank financial institutions including private equity firms and alternative asset managers. This alternative to traditional bank loans is most often utilized by small and mid-sized businesses, which are often highly leveraged and generally cannot borrow in corporate bond markets. Although private credit is a small slice of overall business financing, it has been growing very fast, raising concerns among some banks about the competition and among some regulators about risks to financial stability.

On Thursday, April 4, at 1:30 p.m. EDT, the Hutchins Center on Fiscal & Monetary Policy discussed the reasons for the rapid growth of private credit, the implications for banks and borrowers, and whether private credit could pose a financial stability risk, with four experts who brought different perspectives to the issue.

Viewers asked questions of the panelists by emailing [email protected] and on X/Twitter using the hashtag #PrivateCredit.

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