ASIC warns private credit sector of looming stress and possible fund run

ASIC commissioner Simone Constant addressed a Sydney gathering of finance brokers, warning that the “clock is ticking” on potential credit stress in the Australian private-credit market. She highlighted the Bathla property developer’s failure, which exposed multiple loans held by CVS Lane First Mortgage Fund and CVS Lane Property Finance Fund, as evidence of insufficient oversight. ASIC’s two recent reports revealed that only a handful of the 28 examined funds disclosed interest rates, maintained written credit policies, or separated loan approval from performance monitoring, and few performed stress testing.

Compared with jurisdictions such as Singapore, the US and the UK, Australia lags in disclosure standards. Globally, private-credit assets have surged, prompting firms like Morgan Stanley and North Haven to curb redemptions, fueling fears of a contagion. FinCap executive chairman Christian Ryan told one outlet that a rapid, large-scale exit of capital from Australian funds is “possible,” prompting some managers to pre-emptively limit withdrawals. Reserve Bank governor Michele Bullock later noted that, while non-bank lending supports construction, there is no sign of systemic weakening of standards.