Fed Requests Banks' Private Credit Exposure Data

The United States Federal Reserve has requested detailed information from major banks about their exposure to the private credit market, amid a surge in investor redemptions and rising troubled loans in the sector. The inquiries, conducted through routine oversight channels, aim to evaluate the level of stress in the roughly 1.8 trillion-dollar industry and its potential to affect the broader financial system, according to sources familiar with the matter.

Private credit funds, which provide loans to mid-sized companies using investor capital rather than bank deposits, have faced significant pressure in recent months. Investors requested more than 20 billion dollars in withdrawals during the first quarter, prompting major asset managers including BlackRock, Apollo Global Management, Blue Owl Capital, Ares Management and Morgan Stanley to impose limits or gates on redemptions. For instance, Blue Owl's OBDC II fund closed to withdrawals after a 200 percent increase in requests, while Morgan Stanley's North Haven Private Income Fund fulfilled only about 46 percent of tender offers in March. This liquidity crunch stems from illiquid underlying assets, such as loans to highly...