Assessing Private Credit Risks and Exposures

Private Credit (PC) concerns have risen, driven by software displacement fear and retail liquidity challenges, with Federal Reserve inquiries and gating headlines reinforcing these fears. However, PC fundamentals are still largely healthy: default rates are not extreme, payment-in-kind rates are not high, and Business Development Companies (BDCs) are not taking on excess leverage. Bank exposure to PC remains a small portion of total lending and is well protected/secured structurally, minimizing contagion potential.

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