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Mounting Private Credit Bubble Concern - UBS

Mounting Private Credit Bubble Concern - UBS

(5 December 2023 – Global) UBS has warned the growing private credit market that has roughly tripled in size since 2015 risks becoming the next precursor to a global financial crisis.

UBS Chairman Colm Kelleher warned of the risks surrounding private credit, declaring that a single incident could spark a "crisis in confidence" that leads to a major crash. Rising interest rates and increased market volatility has boosted the private credit sector, as borrowers seek out the increased flexibility that private lenders offer. 

The rapid expansion has seen the size of the private credit market expand from a value of US$875 billion in 2020 to US$1.4 trillion in 2023 according to Morgan Stanley research. 

“There is clearly an asset bubble going on in private credit. There are many other asset bubbles building. What it needs is just one thing to trigger a fiduciary crisis” Kelleher said at the FT Global Banking Summit in London. 

"Something will happen and cause a crisis of confidence. Commercial real estate is another risk, and the cryptocurrency crash could have sparked problems had it been more of a mainstream investment” Kelleher added. 

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