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  • Writer's pictureBill Ebinger

Private Credit: Navigating the Debate on Systemic Risk




Private credit might be the ticking time bomb of systemic risk — and there are fair arguments for both sides.


It's caught the attention of big players like UBS's Colm Kelleher and Apollo's Marc Rowan, with each offering contrasting views on its potential systemic risk. 


Kelleher warns of a crisis brewing in shadow banking, while Rowan argues that moving assets off bank balance sheets could actually decrease overall risk.


Goldman Sachs' analysts have also chimed in, skeptical about private credit causing widespread financial turmoil. They suggest that the size of the private credit market, though substantial at $530 billion, needs to be leveraged more to trigger a systemic crisis.


Jamie Dimon of JPMorgan also weighed in on the topic: “It’s always best to adjust to new reality quickly…The new reality is that some things — for example, holding certain types of credit — are more efficiently done by a nonbank.”


This adds another layer to the debate, emphasizing the need for adaptive strategies in traditional banking institutions (who now face new challenges and competition in the private credit market).


As the industry grapples with these perspectives, it's becoming increasingly clear that building teams with diverse skill sets capable of navigating such complexities will be invaluable. 


From our perspective, this isn’t just about risk assessment — it's about having leaders who can steer through differing viewpoints and evolving market conditions.


One thing is certain: the private credit industry is in flux. 


With aggressive interest rate hikes and a booming market, firms are bracing for a period of adjustment. 


This could mean more hands-on experience with workouts and a potential reshuffling of reputations within the industry.


Ultimately, will private credit be the source of the next financial crisis, or is it a red herring in the search for “the next subprime”? 


Only time will tell.


Take a look at the full Financial Times article here for more information.

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