Listen to the latest episode of Credit Exchange with Lisa Lee
Published in London & New York
10 Queen Street Place, London
1345 Avenue of the Americas, New York
Creditflux is an
company
© Creditflux Ltd 2026. All rights reserved. Available by subscription only.
News Analysis
Private credit comes under scrutiny from US regulators
by Lisa Fu
Global watchdogs sounded the alarm, then European central bankers weighed in with concerns about systemic risk. Now US lawmakers and regulators are putting private credit under the magnifying glass.
Once a niche business with a low profile, private credit has found itself thrust into the spotlight after borrower defaults and liquidity issues fuelled fears that the industry could spark the next financial crisis.
Since taking off after the last global crisis, private credit has offered a flexible option for corporate borrowers outside the more regulated banking industry. But its expanding business is intertwined with institutional lenders and investors, and stewards of the global financial system have warned that a private credit shock could ripple through banks, private equity and pension funds.
After prominent bankers and institutions such as the International Monetary Fund and the Financial Stability Board (a global watchdog) flagged up the risks, US regulators and lawmakers are taking notice. The result is a barrage of questions aimed at private credit managers.
“I think a lot of folks in private credit are a little surprised... at all the attention,” said Eric Jacobson, senior principal in fixed income strategies for Morningstar.
Responding to headlines
Some feel it was just a matter of time before regulators became twitchy about the growing reach of private credit, especially as questions about loan quality and redemptions hit the headlines.
“They’re kind of a victim of their own success,” said Michael Piwowar, executive director for Georgetown’s Psaros Center for Financial Markets and Policy.
The US Securities and Exchange Commission (SEC) has served notice it is looking for incipient risks or problematic sales practices. David Woodcock, its enforcement director, said last month it was a priority to reinstate the regulator’s working group on retail fraud. He called on private credit managers to ensure sales staff understood the investment profile, risk tolerance and liquidity needs of clients.
Chairman Paul Atkins has also entered the fray. “The SEC is closely monitoring both the lending gap that private credit has filled and the emerging pressures that it has experienced, including elevated redemption requests and rising default-rate projections,” he said in an April speech in Washington.
They’re a victim of their own success
Michael Piwowar
Executive director
Psaros Center for Financial Markets and Policy
Meanwhile, media reports have been swirling that federal prosecutors are probing a BlackRock fund over its valuation practices. BlackRock TCP slashed its net asset value by 19% after reviewing its exposure to distressed assets and tech-sector borrowers. BlackRock declined to comment, and the federal district court said to be involved with the case did not respond to requests for a statement.
Private credit is also on legislators’ minds as the Trump administration pushes to allow workplace retirement accounts to be invested in alternative assets. According to Marcus Childress, co-head of the congressional investigations practice at law firm Akin, lawmakers start asking questions when constituents’ money is at stake, as they are keen to show they are heading off problems.
In March, congressmen Seth Moulton and Stephen Lynch, both Democrats representing Massachusetts districts, called for private credit markets to be stress tested to protect the American public. Two months later, fellow representative Richard Neal urged a congressional watchdog, the Government Accountability Office, to review the effects of investing in private credit on retirement plans.
The industry may argue it has not breached any existing law, but legislators will focus on the need for any new, preventative rules. “Frankly, it’s kind of hard to get out of congressional scrutiny,” said Childress, adding that a cooperative approach could seek to allay concerns and instil confidence about the way the sector is operating.
Parts of the industry already face a growing weight of disclosure demands through filings associated with credit funds marketed to individual investors.
Meeting financing needs
Meanwhile, industry groups and some policymakers have argued that private credit serves important financing needs and does not pose enough of a threat to justify tighter regulation.
As yet, the US chorus of concern has not translated into any crackdown, with officials only signalling the need for scrutiny. Their approach has been less aggressive than the response from Europe, Piwowar says.
European regulators are reviewing valuation practices and expanding financial system stress tests to include private credit, with a focus on the risks from hidden leverage and liquidity mismatches.
“Regulate first and ask questions later is never right,” Piwowar said. “Asking for accurate, timely, relevant information, and starting to ask questions, is the right thing to do.”
