Episode Details

The Private Credit Market has emerged over the last year as a big potential risk to the U.S. banking system. What are the main risks from this newer segment of the lending market? This episode examines four main risks. 1) Banks could experience direct losses from loans secured by private credit funds, i.e. NDFI lending. 2) Banks could lose their largest loan segment. Lending to NDFIs has become big banks #1 lending category over the last few years. 3) Banks will no longer be able to pass bad deals onto the Private Credit Market, SRTs anyone! 4) A contagion of delinquency leads to a drop in values. NAVs drop, real estate values drop, company value drops, leading to defaults, leading to bad loans, which leads to loan losses. This chain goes from company to Private Credit Fund back to originating bank. This episode examines an article from Bank Director titled “The real risk of Private Credit to banks.” A link to the article is included below.

Link: The Real Risks of Private Credit to Banks | Bank Director