Europe is urgently seeking information on investments in the private credit market, valued at over $2 trillion, but faces resistance from the United States amid concerns that this could escalate and affect the stability of the global financial system.
July 10, 2569 at 13.02:XNUMX a.m., Reuters reported that European financial regulators are facing resistance from the U.S. Treasury Department. Following calls for greater transparency regarding investments in the private credit market to assess potential risks to the global financial system, amid growing divergence of opinions across the Atlantic on financial regulation.
The global private credit market is currently valued at approximately US$2 trillion, with the majority concentrated in the United States. European regulators are concerned about a lack of transparency in this market, particularly regarding information disclosure, asset valuation, and complex funding structures.
These concerns have intensified following incidents where some funds restricted redemptions and several companies defaulted on their debt, raising worries that the risks inherent in the private credit market could spill over into the wider financial system.
European regulators are therefore seeking in-depth information about the assets held by financial institutions, including borrower data, valuation methods, and collateral used to support investments, in order to more accurately assess risk.
However, U.S. Treasury officials oppose widespread data sharing, arguing that the information is confidential and requiring further disclosure would unnecessarily increase regulatory burdens on businesses.
Michael Teirer, a member of the German central bank (Bundesbank). He revealed to Reuters that... Europe has faced resistance from some regulatory bodies, with some citing legal restrictions on disclosure, while others argue that reporting more information would create a greater paperwork burden for businesses.
The news source stated that This issue has been raised for discussion in several international forums, including the Financial Stability Board (FSB).
FSB spokesperson specify that The incomplete data and differing definitions of private credit across countries make it difficult to compare risk between nations. Therefore, more consistent standards for disclosure and reporting are needed.
Some European regulators warn that, if access to sufficient information is lacking, regulators may need to require banks to increase their capital to cover the potential risks associated with investing in this type of asset.
Although a study by the European Central Bank (ECB) found that direct investment by eurozone banks in private credit still accounts for only €62,500 billion, or about 0.2% of total assets, while insurance companies and pension funds hold a combined total of around €263,000 billion, the risk is concentrated in a few large financial institutions, particularly in Germany, France, and the Netherlands.
The ECB also found that while the direct damage to private credit may be manageable, a widespread sell-off in financial markets or asset devaluation could have a more severe impact on the financial system than the credit itself.
European officials are concerned that risks in the private credit market are becoming more difficult to track as assets are restructured and diversified through multiple layers of financial instruments such as collateralized loan obligations (CLOs), leveraged lending, and reinsurance, making the link between banks, insurance companies, and pension funds more complex.
side Michelle Bowman, Vice Chair of the Federal Reserve (Fed) in charge of regulatory oversight. said The default rate of non-banking companies would have to be unusually high to pose a risk to the banking system. It was also confirmed that most loans extended by banks to private credit companies are adequately secured.
However, she revealed that the Fed is revising its bank reporting requirements to make them more detailed, particularly regarding lending to non-bank financial institutions, in order to more effectively monitor the risk of investment concentration.
refer : www.reuters.com
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