Regulation of fast-growing private loan market to rise

Significance Private credit fills the gap for firms that have grown too large for bank loans but are not large enough to tap bond and equity markets. While initially viewed as relatively low-risk, the lack of regulation and transparency around private credit -- plus its huge growth -- are raising concerns about liquidity and solvency. Impacts By tightening rules early in terms of market development, the EU risks keeping firms under tighter funding curbs than their US counterparts. Private credit helps some firms buy themselves from public equity ownership and avoid bond markets, further reducing access to information. Private credit may be higher than the USD2.1tn reported market size but the large undrawn component insulates participants against shocks.