The Dallas and New York Federal Reserve banks will launch a pilot survey of the private credit market after the third quarter ends, with results due in the first quarter of 2027. The survey splits borrowers into three size bands and arrives as regulators struggle to gauge the sector's risks amid a lack of transparency.
The Dallas and New York Federal Reserve banks plan to launch a pilot survey of the estimated $1.3 trillion private credit market after the third quarter ends, the New York Fed said in a statement on Wednesday. The findings are expected to be published in the first quarter of 2027.
Regulators will segment the market into three sections based on borrower size: an upper middle market with more than $100 million in earnings before interest, taxes, depreciation and amortization, a middle market between $30 million and $100 million EBITDA, and a lower middle market with less than $30 million EBITDA. According to the New York Fed: "this survey will provide insights into the availability of credit, credit provision", with implications for the broader economy and monetary policy.
Private credit's expansion began as a way to fund private equity buyouts after the 2008 financial crisis, when bank financing dried up. It then grew into a prime source of debt financing for riskier businesses, drawing capital from income-hungry investors. Yet the sector remains tiny compared with the traditional banking industry, and it has been dogged by concerns over the quality of lending standards and a lack of transparency.
Regulators have struggled to assess the potential dangers private credit poses to banks because of a dearth of data and their inability to force the unregulated industry to disclose information. Meanwhile, the pace at which investors are demanding money back from some private credit funds, known as business development companies, has accelerated this year on worries about competition, falling returns and fears that artificial intelligence will upend software businesses financed by them.
Source: Reuters via Yahoo Finance
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