Aug 5 (Reuters) – The Dallas and New York Federal Reserve banks plan to launch a pilot survey into the estimated $1.3 trillion private credit market after the end of the third quarter, the New York Fed said in a statement on Wednesday.
Private credit’s expansion began as a means of funding private equity groups’ buyouts after the 2008 financial crisis saw bank financing dry up. It then swelled into a prime source of debt financing for riskier businesses, drawing in capital from income-hungry investors.
Though still tiny compared with the traditional banking industry, the sector has been dogged by concerns over the quality of lending standards and a lack of transparency.
The survey would segment the market into three sections based on borrower size: an upper middle market with more than $100 million in earnings before interest, taxes, depreciation and amortization; a middle market between $30 million and $100 million EBITDA; and a lower middle market with less than $30 million EBITDA, the statement said.
Findings of the survey are expected to be published in the first quarter of 2027, it said.
Regulators have struggled to assess the potential dangers of private credit to banks due to a dearth of data and the inability to force the unregulated industry to disclose information.
“In recognition of the growth of private credit, this survey will provide insights into the availability of credit, credit provision, the evolution of lending standards in private credit markets, and the implications for the broader economy and monetary policy,” the New York Fed said.
The pace at which investors are demanding money back from some of the private credit funds, known as business development companies, has accelerated this year on worries about competition, falling returns and fears that artificial intelligence will upend software businesses financed by them.
(Reporting by Kanjyik Ghosh in Barcelona; Editing by Mark Porter and Paul Simao)
