Fed asks banks about private credit

The Federal Reserve has been asking major United States banks for details on their ties to private credit as investor withdrawals and troubled loans mount. (bloomberg.com) Bloomberg reported on April 10 that Fed examiners want to measure stress in private credit and whether losses could spread into the wider financial system through banks. Reuters matched the report the same day and said the requests went to major U.S. banks. (bloomberg.com) (reuters.com) Private credit is lending done outside traditional banks, usually by funds that make direct loans to companies and then finance themselves with investor capital and bank credit lines. A May 2025 Federal Reserve note said committed credit lines from the largest U.S. banks to private credit vehicles reached about $95 billion by the fourth quarter of 2024, up from about $8 billion in 2013. (federalreserve.gov) The market grew quickly while banks pulled back from some riskier corporate lending after the 2008 crisis and after later capital rules made some loans less attractive on bank balance sheets. A New York Federal Reserve explainer published in October 2025 said U.S. private credit was approaching $1.3 trillion and accounted for about 30 percent of debt issued by below-investment-grade-rated companies. (newyorkfed.org) The pressure point this month was redemptions at funds that promise limited liquidity while holding loans that do not trade much. Bloomberg reported on April 9 that Carlyle Tactical Private Credit Fund, a $7 billion vehicle, got first-quarter redemption requests equal to 15.7 percent of shares and capped payouts at 5 percent. (bloomberg.com) Reuters reported on April 6 that Goldman Sachs’ private credit fund received repurchase requests for just under 5 percent of shares in the first quarter, below the level that forced some rivals to restrict withdrawals. Reuters also reported on April 2 that several brokerages were warning of higher defaults ahead, especially in software borrowers. (reuters.com 1) (reuters.com 2) Banks say their links to private credit can be manageable because much of the exposure is through secured lending, subscription lines, warehouse financing, and partnerships rather than direct ownership of the loans. Fitch said in February 2025 that direct bank exposure was growing but posed limited risks “for now,” while also warning that the market’s opacity makes second-order effects harder to measure. (fitchratings.com) Regulators have been trying to map those links in more detail. A February 2026 Office of Financial Research brief said counterparty exposure to private credit generally comes through debt financing to private credit funds and through limited partners’ equity commitments, underscoring why supervisors are asking banks for more granular data. (financialresearch.gov) The immediate question is not whether private credit disappears, but whether slower exits, weaker borrowers, and bank funding lines turn a niche credit problem into a broader funding problem. The Fed’s inquiry suggests supervisors want that answer before the next round of losses forces it. (bloomberg.com) (federalreserve.gov)