By Dave Michaels, Dylan Tokar and Gina Heeb
Wall Street's watchdogs are ramping up their inquiries into how much risk has built up in the $3 trillion private-credit industry, just as investor angst has sparked some backers to head to the exits.
The Securities and Exchange Commission in recent months has opened several enforcement investigations of large private-credit managers, according to people familiar with the matter. The Treasury Department has requested information from private fund managers and insurance firms about their business models. Bank regulators, too, have stepped up their focus on the risks posed by the industry, with the Federal Reserve querying banks about their lending and exposure to private credit.
Regulators have been watching for risks stemming from the growing private-credit market for years, but the recent outreach adds to scrutiny amid a wave of withdrawals, slowing inflows and dropping stocks, people familiar with the latest actions said. The agencies have been acting separately but discussed the turbulence during a recent meeting of the Financial Stability Oversight Council, they said.
None of the regulators are sounding dire alarms yet, and Trump administration officials have said publicly they don't think losses in private-credit funds would ripple painfully through the financial system, echoing what executives and bankers have said too.
SEC Chairman Paul Atkins in a speech Tuesday said the SEC was monitoring the emerging pressures facing private credit, even as it looks for ways to give ordinary investors access to the market. "Let me be clear that opacity in this space can be an issue," he said.
Private credit is mostly composed of loans to middle-market businesses extended by asset managers, who don't face the same close supervision as banks. In the first quarter, investors sought to pull more than $20 billion from certain types of private-credit funds, though they were only able to get $11 billion, according to data from investment bank Robert A. Stanger. Investors have been spooked by several high-profile losses, and the industry's exposure to software companies challenged by AI.
Private-credit executives say they are not overly concerned because actual loan losses are scant. This month, bankers including JPMorgan CEO Jamie Dimon and Wells Fargo CEO Charlie Scharf played down the risk of private-credit losses spreading across banks and the financial sector. Banks disclosed more about their exposures to the funds, answering the kinds of questions regulators and their own investors have been asking.
"I don't think it's systemic. It almost can't be systemic at that size relative to anything else," Dimon told analysts last week, though he predicted pain was likely. "I'm not particularly worried about it."
SEC examiners
The SEC serves as the primary regulator for the private-credit industry, but even its oversight is only partial, since private funds don't regularly disclose holdings and report little about private credit on forms that regulators use to assess systemic risk.
Its enforcement investigations, which are in their early stages, are looking at how credit managers value the loans they hold and whether they are sticking to policies they disclose to investors, the people said.
The investigators have also asked about how firms package loans into different funds for big clients, such as pension funds, and for smaller investors, and whether that creates conflicts of interest, the people said.
The SEC sometimes closes probes without taking enforcement action.
SEC examiners, who are separate from the enforcement division, have also been asking more questions.
Over the past six months, examiners have been conducting a wide-ranging inspection of Blue Owl Capital, according to some of the people. The exam began around the time that Blue Owl faced pushback for trying to merge two of its retail-focused loan funds.
Blue Owl has been at the center of the industry's recent stress and investors in two of its biggest funds asked to pull some $5.4 billion in the first quarter.
This week, the SEC issued a regulatory proposal that suggested it could seek more granular data on credit funds' activities and asked investors for feedback on the "greatest risks from private credit or private credit funds from a systemic risk perspective."
Treasury Department scrutiny
The Treasury Department stepped up its scrutiny earlier this month with written requests to private credit fund managers and insurance companies. The requests follow months of individual meetings with fund managers and concerns voiced by Secretary Scott Bessent about the possibility of spillover into the regulated financial system.
The SEC, Treasury and Fed have focused on how much leverage the private-fund managers have, whether the funding provided by banks is irrevocable, and what would happen if a bank pulled financing, people familiar with the matter said.
Using confidential supervisory information, the Office of Financial Research, an independent bureau created to monitor risks across the financial system, last month estimated that bank and nonbank lending exposures to private credit ranged from around $410 billion to $540 billion.
The Treasury Department earlier this month said it plans to convene state and international insurance regulators to discuss recent market events and emerging risks relating to the private-credit industry.
The industry says the funds are safe, since they come with redemption caps to prevent runs by skittish investors and are priced accordingly and marketed as "semi-liquid."
"It's been an opportunity to demonstrate that these products are working the way they are supposed to," Jillien Flores, chief advocacy officer for industry trade group Managed Funds Association, said of the Treasury's information requests.
Write to Dave Michaels at dave.michaels@wsj.com, Dylan Tokar at dylan.tokar@wsj.com and Gina Heeb at gina.heeb@wsj.com
(END) Dow Jones Newswires
April 22, 2026 22:00 ET (02:00 GMT)
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