Fed probes banks' private‑credit risk

The Federal Reserve has started asking big United States banks for detailed numbers on their ties to private-credit firms after investors rushed to pull money from some funds and more loans in the sector turned shaky. Bloomberg reported the questions went to major banks on April 10, 2026. (bloomberg.com) Private credit is just lending done outside traditional banks, usually by funds that raise money from pensions, insurers, wealthy clients, and retail-style vehicles. Those funds make loans to midsize companies that often cannot issue bonds easily or borrow on standard bank terms. (financialresearch.gov) The catch is that banks never really left this business. A May 2025 Federal Reserve Bank of Boston note found loan commitments from large banks to private equity and private credit funds jumped from about $10 billion in 2013 to about $300 billion in 2023. (bostonfed.org) Moody’s said United States banks had about $300 billion of loans to private credit providers by June 2025, inside a much bigger $1.2 trillion pile of lending to non-depository financial institutions. That means the banks are not just competing with private-credit managers for borrowers; they are also financing the managers themselves. (moodys.com) That setup works fine when investors keep sending cash in. It gets harder when the funds own loans that cannot be sold quickly but promise investors periodic exits, which is why several business development companies have recently hit withdrawal limits. (reuters.com) Apollo Global’s Apollo Debt Solutions, a $25 billion private-credit fund, capped redemptions at 5% of shares on March 23 after investors asked to pull about 11.2%. Reuters reported BlackRock’s HLEND also hit its 5% limit in March, the first breach since that fund started. (reuters.com 1) (reuters.com 2) The loan book has been getting uglier too. The Office of Financial Research said recent cracks included the September 2025 bankruptcies of First Brands Group and Tricolor, plus a February 2026 selloff in software loans tied to fears that artificial intelligence could weaken some borrowers’ business models. (financialresearch.gov) First Brands alone showed how fast hidden leverage can turn into real losses. The company filed for Chapter 11 on September 28, 2025, and Reuters reported liabilities above $10 billion; federal prosecutors later said lenders and creditors faced billions in losses. (reuters.com) (justice.gov) Regulators are looking at two routes for trouble to reach banks. The Office of Financial Research estimated $410 billion to $540 billion of exposure through debt financing to private-credit funds, plus about $300 billion of limited-partner capital commitments that can link the sector to other institutions. (financialresearch.gov) The immediate fear is not that every private-credit loan blows up at once. The fear is that redemptions force funds to gate withdrawals, downgrades make valuations less believable, and banks then have to decide whether to keep lending, demand more collateral, or absorb losses on lines that looked safe a quarter earlier. (spglobal.com) (moodys.com) That is why a bank exam question can move markets even before any rule changes. When the Federal Reserve starts asking for exposure maps, it usually means supervisors want to know which balance sheets could be hit first if a supposedly private problem stops staying private. (bloomberg.com)