Out of the shadows: the growing regulatory spotlight on private capital

In recent months, there has been significant media coverage on the growing regulatory scrutiny of the private capital sector. In this podcast, our team of senior lawyers from across the global Freshfields network discuss what this actually means and where regulators’ attentions lie.

Since the 2008 financial crisis, the private credit market has enjoyed uninterrupted growth to become one of the fastest-growing segments of the lending market. Having reached $1.5tn assets under management (AUM) at the start of 2024, the market is expected to grow to $2.8tn by 2028. This significant growth is reflective of increasing borrower demand and the attractiveness of private credit as a more flexible and tailored financing alternative to traditional bank loans. However, the rapid rise in private credit’s popularity has also come with increasing regulatory scrutiny from both regulators and governments, who are concerned about the potential for heightened risks to the financial system. 

In this podcast, Matt O’Callaghan, a partner based in Hong Kong and head of the firm’s financial services regulatory team in Asia, moderates a discussion with Nariné Atamian in New York, Theresa Kreft in Munich, and Greg King in London. The team discuss the focus of regulators on the private capital sector, the role and risks of private credit as a lender in the economy and how regulators are approaching reviews of banks’ risk management systems in the context of private capital exposures. They also consider how regulators are increasing their scrutiny of private credit institutions themselves, offering insights into how the industry might navigate this evolving landscape across the world and providing some takeaways that private credit and financial institutions should be aware of as the industry and the regulatory response continues to develop.

The podcast is available here.