The U.S. Treasury will meet with insurance regulators to discuss the private credit industry.
Those meetings will kick off next month and involve domestic and international insurance regulators, the department said in a Wednesday (April 1) press release.
“This first series of meetings will allow participants to survey recent market events, emerging risks, risk management practices, and outlooks for the sector,” per the release.
The meetings will also “facilitate greater regular communication with the state insurance regulators, who serve as the insurance industry’s primary regulators, and lay the groundwork for sustained close collaboration,” the announcement said.
The announcement follows a report Sunday (March 29) from Reuters that the government was planning on meeting with insurance regulators amid concerns about liquidity, transparency and lending discipline in the $2 trillion private credit industry.
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That report cited comments Treasury Secretary Scott Bessent made in February to the Economic Club of Dallas, where he argued that when assets shift from private credit lenders into regulated financial institutions, such as banks, pension funds or captive insurance companies, “Treasury gets involved.”
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As covered here in March, the debate around private credit has sharpened recently as bank filings and executive commentary highlight the scale and potential vulnerabilities of this sector.
Private credit funds have drawn in investors looking for higher yields than those available in public bond markets. The asset class exists largely outside the transparency standards applied to traditional banking or public debt markets. Loans are normally held in private portfolios and valued internally by the funds that originate them, which can mask deteriorating credit conditions until stress becomes impossible to ignore.
“The overarching concern may not herald an imminent crisis, but the structure of the market could amplify shocks if credit conditions deteriorate,” PYMNTS wrote.
A look at bank disclosures offers some insight into the sector. Lending by banks to non-deposit financial institutions, a category that includes private credit funds, has risen sharply in recent years. Data from the Federal Reserve Bank of St. Louis shows that bank loans to these institutions reached roughly $1.14 trillion last year.
PYMNTS wrote last week about a shift in the industry, where funding access now depends on how loans are financed after origination. Market signals show capital moving to structured credit even as liquidity stress has shown up in fund-based lending.
“In short, private credit is no longer a contest of who can originate loans. It is becoming a test of who can move them,” that report said.