Private Credit: Risks and Benefits of a Maturity Wall

Rui Albuquerque and Adam Zawadowski

No 20737, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A maturity wall arises when private credit funds reach the end of their term and can no longer roll over loans. Unlike banks, which face no maturity wall, private credit funds use the maturity wall as a credible commitment to liquidate distressed borrowers, thereby strengthening ex-ante incentives, albeit at the cost of ine!cient liquidation. The model predicts that private credit ex-pands aggregate credit supply, reallocates riskier loans away from banks, and amplifies aggregate downturns. Private credit funds emerge as a mechanism that approximates the second-best optimal contract when full commitment is unattainable.

Keywords: Systemic; risk (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Date: 2025-10
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