The Federal Reserve is requesting detailed information from major U.S. banks regarding their exposure to private credit, according to informed sources. This action comes amid a surge in redemptions from private equity funds and an increase in non-performing loans within the sector. The inquiries from Fed examiners are intended to assess stress levels in the private credit industry and the potential for it to spill over into the broader financial system. The Fed has incorporated several questions into its regular supervisory process, including requests for details on debt that private credit funds have taken on from banks. Such debt can enhance returns during economic booms, making private credit funds more attractive, but it may expose banks to losses during downturns.
Separately, the U.S. Treasury Department is also questioning the insurance industry about private credit exposures. These actions represent some of the strongest signals to date that U.S. regulators are working to gauge and contain mounting pressures in the private credit market. The U.S. private credit industry has expanded into a $1.8 trillion sector, originally catering to institutional investors but increasingly targeting individual investors as well. Private credit, which relies on investor capital rather than bank deposits to make loans, has long been on regulators’ radar. In recent months, retail credit funds have faced stress as investors pull money out, prompting regulators to intensify their focus.
The regulatory push coincides with warnings from a growing number of international authorities about risks in private credit. Andrew Bailey, Chair of the Financial Stability Board and Governor of the Bank of England, stated this week that market shocks from the war in Iran could place additional strain on private credit. The Financial Stability Oversight Council noted in late March that it had discussed recent developments in the sector.
The Fed’s inquiries come as financial regulators under the Trump administration have sought to ease regulations on Wall Street lending giants. Part of the aim of this deregulatory effort is to enhance banks’ ability to lend to private credit firms and help traditional lenders better compete with nonbank institutions in areas such as mortgages and small-business loans. Some sources indicate that officials, including Fed Vice Chair for Supervision Michelle Bowman, also want to pose more strategic questions to the industry about potential risk areas, even as they pursue regulatory relief.
Banks have sought to distinguish themselves from less-regulated nonbank competitors. JPMorgan Chase CEO Jamie Dimon warned in his latest annual letter that the private credit industry suffers from a lack of transparency and poor valuation standards, though he does not view it as a systemic risk. Wall Street banks maintain close ties with private credit peers. Credit funds depend on banks for services like asset custody and credit lines. If private credit portfolios experience deterioration, bank loans serving as collateral could be at risk.
As of the end of 2025, Blackstone Private Credit Fund reported a debt-to-equity ratio of 0.7x. Blue Owl Credit Income Corp. had a ratio of 0.8x as of February 28, while KKR FS Income Trust’s ratio stood at approximately 0.7x at the end of February.
The Fed’s scrutiny follows a separate Treasury initiative to query insurers about their exposures. Regulators have reportedly assembled a team to handle the matter. In an April statement, the Treasury said it plans to meet with state regulators, who directly oversee U.S. insurers, to discuss emerging risks and the industry’s outlook. The statement also indicated the Treasury expects to hold discussions with international regulators. The review is expected to continue in the coming months, with some financial firms likely to hold their own meetings with the Treasury.
Over the past decade, insurance companies have helped drive the rise of nonbank lenders, gaining greater influence over large pools of capital. Private credit firms have used these funds to make corporate loans and invest in complex structures.
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