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Private Credit on Regulatory Radar

May 12, 2026

Authorities are seeking better visibility into the private credit markets, now estimated at $1.5 to $2 trillion, particularly where life insurers are involved. Private credit is generally defined as loans originated by nonbanks and negotiated on a bilateral basis between borrowers and lenders.

Why it matters: Private credit has become a meaningful source of financing for mid-sized companies and, increasingly, larger borrowers and AI infrastructure projects. Regulators and policymakers are assessing whether insurers' shift toward private credit introduces opaque risks that could affect policyholders or trigger rapid asset sales.

Driving the news

• The FSB: The global body coordinating financial regulation released a report on May 6 examining the private-credit ecosystem, bank interlinkages, borrower credit quality, and data gaps. The report notes that the sector can support economic activity by offering alternative credit solutions to borrowers, but remains untested to a prolonged economic downturn.
• Treasury: On May 7, Treasury Secretary Scott Bessent met with state insurance commissioners and the National Association of Insurance Commissioners (NAIC) to discuss recent developments in private credit markets.
• Federal Reserve: On May 8, the U.S. central bank released its biannual Financial Stability Report. It noted strong household balance sheets and well-capitalized banks. However, “a wide range of market contacts who participated in the Survey of Salient Risks in March and April most frequently cited geopolitical risks, oil shocks, risks from artificial intelligence (AI), private credit, and persistent inflation.”
  • The report added the following new sections: “Updates in the Classification of Nonbank Financial Institutions” and “Developments in Private Credit.”
  • Survey respondents viewed private credit as:

Market Size and Composition

• The FSB estimates the global private-credit market to be $1.5 trillion –$2 trillion as of year-end 2024, with the United States having the largest market, with an estimated size of around $1 trillion. 
  • Bank exposure to private credit funds is a relatively small share of banks' total assets and capital, with member data capturing about $220 billion in drawn and undrawn credit lines. However, other estimates suggest the amounts could be more than twice as large.
  • Private equity-backed insurers in the U.S. now control nearly $900 billion in insurance liabilities, a significant rise from $67 billion in 2012.
• Private credit’s growth, according to the FSB, has been driven by the increased demand for high-yield and tailored credit due to:
  • Prolonged low-interest rate environment;
  • Changes in post-crisis bank regulation; and 
  • Expansion of private equity.

Regulators are focused increasingly on transparency, particularly as it relates to private credit in the insurance sector. 

• The FSB found that borrowers that are predominantly in private credit typically lack public ratings, and that valuations are often conducted less frequently and may involve significant discretion. 
• According to American Banker, Secretary Bessent said Treasury is monitoring the growing exposure of insurers to private credit to ensure that state-based oversight remains effective. 
• State regulators also shared their efforts to monitor private credit and protect policyholders. Elizabeth Dwyer, director of Rhode Island's Department of Business Regulation Director and NAIC president-elect, stated in a press release:

What's next 

• The FSB outlined four follow-up work areas:
  • Continuing to assess vulnerabilities related to interlinkages between a range of nonbanks within the private finance ecosystem;
  • Mapping the components of the complex and evolving ecosystem;
  • Facilitating supervisory discussions to enhance authorities’ ability to assess and supervise vulnerabilities and risks; and 
  • Addressing data challenges that make it difficult to monitor vulnerabilities. 
• On the insurance side, NAIC adopted a challenge process to so-called private letter ratings, which are confidential credit opinions issued by rating agencies for privately-placed securities. 
  • According to American Banker, this challenge process is the culmination of a multi-year effort that would allow the NAIC to challenge any rating. 
  • NAIC has a team of 30 analysts that review individual transactions to ensure compliance with regulatory standards. No rating challenges have been processed to date. 
  • A rating challenge would have to be a "material," requiring a three-notch downgrade or more for regulators to determine if a rating needs to be changed.

Please contact Sairah Burki (sburki@crefc.org) with questions.

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