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The Federal Reserve Banks of Dallas and New York will study the private credit market.
Economy
The Federal Reserve Banks of Dallas and New York will launch a pilot study of the $1.3 trillion private lending market after the end of the third quarter,
the New York Fed announced on Wednesday.
The private lending sector grew as a source of funding for private equity deals following the 2008 financial crisis, when bank financing became scarce. The market subsequently expanded and became a major source of debt financing for riskier companies, attracting capital from income-seeking investors.
The sector remains small compared to traditional banking, but has raised concerns about the quality of lending standards and a lack of transparency.
The survey will divide the market into three segments based on borrower size. The upper middle market includes companies with EBITDA over $100 million. The middle market encompasses companies with EBITDA between $30 million and $100 million. The lower middle market includes companies with EBITDA under $30 million.
The Federal Reserve plans to publish the results of the study in the first quarter of 2027.
Regulators face difficulties assessing the risks of private lending for banks due to limited data and a lack of authority to require disclosure from an unregulated industry.