US Treasury Ramps Up Private Credit Oversight Efforts

The Treasury Department has been holding one-on-one meetings with private credit leaders for months and is now asking for written responses to its requests for data, Punchbowl News reported Wednesday (April 15), citing unnamed sources.

Through these efforts, Treasury is seeking information about private credit firms’ business models and their ties to the regulated financial system, according to the report.

A Treasury spokesperson told Punchbowl News, per the report, that the department “routinely confers” with market participants and regulators about private credit.

American Investment Council CEO Will Dunham told the publication that private credit funds are well regulated and provide extensive data to federal and state financial regulators. The American Investment Council represents the private investment industry, according to its website.

“Our industry welcomes the opportunity to continue our conversation with regulators about a sector that is functioning as designed,” Dunham said, per the report.

Reuters reported March 29 that Treasury was planning talks with domestic and international insurance regulators about the private credit market.

The report, which cited sources familiar with the matter, said that the talks were being prompted by mounting concerns about liquidity, transparency and lending discipline in the $2 trillion private credit space.

Bloomberg News reported Friday (April 10) that the Federal Reserve has been asking America’s biggest banks to share details about their private credit exposure after a wave of redemptions from the funds and an uptick in troubled loans in the private credit space.

The report, which cited unnamed sources, said the Fed’s query is designed to determine the amount of stress in the private credit sector and its potential to infect the larger financial system.

PYMNTS reported in March that as private credit has expanded from a niche financial tool to a fixture of modern capital markets, regulators, banks and investors are taking a closer look at the risks embedded within that lending class.

The ecosystem now encompasses private debt funds, business development companies, structured vehicles and credit funds financed in part by the banking system itself.

Questions are mounting about transparency and systemic exposure, particularly as large banks disclose new details about their lending relationships with nonbank financial institutions.