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FSB Flags $2 Trillion Private-Credit Threat to Stability

5/7/2026

Summary

FSB Warns

The Financial Stability Board warned that the fast-growing private-credit market threatens financial stability.
It valued the market at $1.5-$2 trillion in 2024 (AIMA $3.5 trillion) and said retail investors hold 13% of assets.
The board warned that open-ended/semi-liquid funds could cause liquidity mismatches with periodic redemptions while holding illiquid loans.
John Schindler, FSB Secretary General, said default rates are rising and cited a $400 million HSBC loss tied to Market Financial Solutions' collapse.

Summary

Private-Credit Expands

The private-credit market has expanded to finance large corporations, moving beyond its original focus on medium-sized firms.
Asset-management firms now act as general partners, structuring and managing the loan funds behind private-credit deals.
Retail investors are receiving direct exposure as private-credit products are increasingly marketed to non-institutional clients.
Regulators struggle to collect reliable data, while the ecosystem’s ties to insurers, private-equity firms and foreign banks raise contagion concerns.

Summary

FSB Flags AI

AI firms made up over one third of private-credit deals in 2025, up from 17% before.
The Financial Stability Board warned that a sharp AI valuation correction could cause sizeable private-credit losses.
The watchdog said electricity shortages could delay datacentre construction, prompting loan defaults on AI-related financing.
Report linked 2025 failures of Tricolor and First Brands, backed by private credit, to fraud allegations, losses at JP Morgan, Barclays, UBS and Jefferies.

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FSB Warns

The Financial Stability Board warned that the fast-growing private-credit market threatens financial stability.
It valued the market at $1.5-$2 trillion in 2024 (AIMA $3.5 trillion) and said retail investors hold 13% of assets.
The board warned that open-ended/semi-liquid funds could cause liquidity mismatches with periodic redemptions while holding illiquid loans.
John Schindler, FSB Secretary General, said default rates are rising and cited a $400 million HSBC loss tied to Market Financial Solutions' collapse.

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