Stress in global private credit markets and its implications for euro area financial stability

Katharina Cera, Daniel Dieckelmann, Kalin Nikolov, Glenn Schepens and Oscar Schwartz Blicke

Financial Stability Review, 2026, vol. 1

Abstract: Recent stress in parts of the US private credit market − including concerns about exposures in the software sector and redemption pressure in semi-liquid vehicles − has led to renewed focus on possible financial stability risks stemming from private credit and the potential relevance of such risks for the euro area. This special feature looks at the exposure of the euro area financial system to private credit. Using available commercial, public and proprietary data, it finds that euro area financial institutions appear to have limited direct exposure to private credit. This makes it unlikely that private credit in isolation could be a source of systemic financial instability at present. However, insurance corporations and pension funds in particular could, in an adverse scenario, face more material second-round revaluation losses from broader spillovers to leveraged loans, high-yield bonds and equities. Private credit could promote long-term growth by channelling funds from long-term investors to innovative firms, thereby supporting the objectives of the EU’s savings and investments union. The market should nonetheless be monitored closely, especially in view of worsening credit quality, possible expansion into retail-oriented structures and a potential role of private credit in AI-related financing. Reducing private credit’s opacity, addressing data gaps and working towards a harmonised definition of private credit at a global level would avoid a potential underestimation of direct exposures and enable risk to be assessed more completely. JEL Classification: G20, G21, G23, G32

Keywords: alternative investments; private credit; private markets; systemic risk (search for similar items in EconPapers)
Date: 2026-05
Note: 3597820
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//press/financial-stabili ... 4~3f2135af91.en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:fsrart:2026:0001:4

Access Statistics for this article

More articles in Financial Stability Review from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().