Aug 5 - The Federal Reserve banks in Dallas and New York plan to initiate a pilot survey of the private credit market, which the New York Fed estimates at roughly $1.3 trillion, the New York Fed said in a statement on Wednesday. The launch is scheduled after the end of the third quarter.
Private credit expanded initially as a channel to fund private equity buyouts when bank financing contracted following the 2008 financial crisis. Over time the sector evolved into a mainstay source of debt financing for higher-risk companies, attracting capital from investors seeking yield.
Despite its growth, private credit remains small relative to the traditional banking system and has faced persistent scrutiny over lending quality and limited transparency. Regulators have found it difficult to evaluate the sector's risks to banks because public data is scarce and the industry is not subject to mandatory disclosure.
Survey design and scope
The pilot will divide the market into three borrower-size segments based on earnings before interest, taxes, depreciation and amortization - EBITDA. The upper middle market will cover borrowers with more than $100 million in EBITDA, the middle market will include those with $30 million to $100 million in EBITDA, and the lower middle market will consist of firms with less than $30 million in EBITDA, the statement said.
The New York Fed said results from the pilot are expected to be published in the first quarter of 2027.
Regulatory context and analytical goals
Regulators have struggled to assess how private credit could affect banks and the broader financial system in part because they lack comprehensive information and cannot compel disclosures from the unregulated parts of the industry. In the New York Fed's words: "In recognition of the growth of private credit, this survey will provide insights into the availability of credit, credit provision, the evolution of lending standards in private credit markets, and the implications for the broader economy and monetary policy."
Investor activity and market pressures
The survey comes amid investor actions that have intensified this year in some private credit vehicles. Redemptions from certain private credit funds, including business development companies, have accelerated as investors express concern about heightened competition, falling returns and fears that advances in artificial intelligence could disrupt software businesses that these funds have financed.
By cataloguing lender practices and borrower profiles across defined EBITDA brackets, the pilot aims to provide a clearer empirical foundation for assessing credit availability and underwriting trends in a sector that has grown rapidly but remains less transparent than traditional banking.