Fed probes major banks over growing private-credit loan exposure
The Federal Reserve Bank of New York has been touring large banks to assess their lending to private-credit firms and the associated risk.
In response to investor unease about private-credit markets, the Federal Reserve Bank of New York has conducted on-site examinations at several major banks, including JPMorgan, Wells Fargo, Barclays and Morgan Stanley. Inspectors focused on the banks’ total exposure to private-credit lenders, the robustness of their risk-management frameworks, and the quality of collateral backing the loans. The inquiry was spurred by JPMorgan’s March move to mark down large portions of its private-credit holdings, notably loans to software companies threatened by AI advances.
The Fed has already wrapped up its review at some institutions, a standard practice when headlines highlight potential systemic risks. Private-credit borrowing by banks has surged from $300 billion in 2016 to over $1.5 trillion, now representing 11 % of all bank loans, prompting parallel scrutiny from the European Central Bank, the SEC and the Bank of England.
Why it matters
Bank exposure to private-credit firms could affect financial stability if loan losses rise.
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