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The US Treasury is telling European financial supervisors, politely but firmly, that they can’t have what they’re asking for. The request in question: comprehensive data on banks’ exposures to the fast-growing private credit market. The refusal, which surfaced during Financial Stability Board discussions on July 10, centers on confidentiality concerns and the administrative headache of new reporting requirements.
A $1.5 trillion blind spot
The private credit market has ballooned to somewhere between $1.5 trillion and $2 trillion globally. It has become the go-to alternative for borrowers who either can’t or don’t want to deal with traditional bank lending.
The FSB has flagged patchy data and inconsistent terminology across the industry, pointing to the need for standardized disclosure practices. When regulators can’t agree on what counts as private credit exposure, tracking systemic risk becomes difficult.
European regulators, led by the ECB, have been pushing for what they call “look-through” capabilities. The concept is straightforward: instead of just knowing that a bank has exposure to a private credit fund, regulators want to see the underlying assets, the actual borrowers, and whatever guarantees are backing the whole thing.
The US Treasury’s position is equally straightforward. Existing legal protections around confidential financial data make this kind of information sharing complicated, and potentially illegal under current frameworks. Adding new reporting requirements on top of that would impose costs that Treasury officials don’t seem eager to absorb.
The numbers behind the standoff
Euro-area banks’ direct global private credit exposures total approximately €62.5 billion, representing just 0.2% of their total assets. European insurers hold roughly €211 billion in private credit exposure, while pension funds carry about €52 billion.
The concern isn’t only about the size of the exposure today. Traditional lenders and private credit funds increasingly operate in the same ecosystem, lending to the same borrowers, sharing the same risks. Recent market strains and an uptick in defaults have amplified these worries. European officials have warned that a lack of transparency could result in stricter capital requirements for supervised banks.
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