FSB Warns of Global Private Credit Risks as Retail Sales and Insurance Exposure Draw Scrutiny

Private credit, in which nonbank institutions lend directly to companies, has become an important alternative to traditional bank financing in recent years. The sector offers less disclosure and limited transparency on valuations and liquidity. The Financial Stability Board (FSB) is concerned about its links to banks and insurers, warning that market stress could transmit losses across institutions and borders and create systemic risks.

In a report released on May 6, the FSB estimated the global private credit market at $1.5 trillion to $2 trillion. It identified the growing sale of products to retail investors, high market concentration and deep insurance-sector involvement as emerging regulatory priorities. The report warned that complex and opaque links to banks could amplify shocks during liquidity crunches or periods of rising defaults.