(29 November 2024 – Europe) A senior European Central Bank (ECB) official has declared private credit firms have expanded so rapidly that they now influence the stability of the broader financial system.
Private credit has become a key focus for regulators after the asset class boomed when banks retreated from certain types of lending following the Global Financial Crisis (GFC).
While authorities have warned about the potential dangers from the sector, the industry and some central banks such as the RBA has pushed back against any arguments that regulation comparable to that of the banking is warranted.
“Some direct lenders have grown to such a scale and have reached such a level of interconnectedness that they now exhibit systemic characteristics. That makes their stability integral to the health of the broader financial system” ECB Supervisory Board Member Elizabeth McCaul said in a speech.