Monetary Matters with Jack Farley Is Private Credit a Systemic Risk? (A Regulator’s View) | Fabio Natalucci
May 17, 2025
Fabio Natalucci, CEO of the Anderson Institute for Finance & Economics and former senior official at the IMF and U.S. Treasury, discusses critical insights on private credit's rise and associated risks to global financial stability. He highlights how economic slowdowns and tariffs impact this sector, questioning the balance between private credit and traditional banking. Additionally, he dives into regulatory challenges, liquidity concerns, and the complexities of the U.S.-China trade dynamics, reflecting on the broader implications for investors and market health.
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Private Credit Growth and Evolution
- Private credit has grown to about $1.7 trillion, mainly in the US, replacing traditional bank lending.
- It is evolving to include real estate, infrastructure, and retail investors, blurring lines with banking.
Risks Returning to Banks
- Diversified funding sources outside banks can enhance financial stability by dispersing risk.
- However, private credit risk often loops back to banks, making monitoring and regulation challenging.
Private Credit's Role in 2020 Crisis
- In March-April 2020, some private credit players extended credit as a bridge when banks pulled back.
- This bridged economic activity until Fed's broad backstopping of markets helped stabilize the system.