Private Credit Firms Escalate Criticism of Banks Amid Industry Scrutiny
LONDON – Executives from leading private credit firms have sharply criticized traditional banks, defending their industry’s role in recent corporate failures and pushing back against calls for stricter regulation. the escalating war of words comes as the $3 trillion private credit sector faces increased scrutiny from regulators concerned about potential systemic risks.
Apollo’s Jamie Leach and Blackstone‘s Robert Leiter, appearing before the Financial Services Regulation Committee, argued that recent financial difficulties were not caused by private credit origination, but rather by existing public debt held by banks. “There has been a lot of misinformation on this credit,” Leiter stated. leach added that first brands was “predominantly financed in the public credit markets… predominantly financed by broadly syndicated loans… which according to public reporting appear to have been held by banks.”
The exchange marks a new peak in tensions between the two industries, fueled by private credit’s rapid growth over the past 15 years. Initially focused on lending to distressed companies unable to secure financing elsewhere, the sector has expanded significantly, benefiting from prolonged periods of low interest rates following the 2008 Global Financial Crisis and increased regulation on banks.
This growth has prompted concerns among regulators,including the Bank of England’s Prudential Regulation Authority,about the potential for private credit to trigger a wider financial breakdown. The opaque nature of private loans – often kept confidential with undisclosed terms - complicates oversight.
However, Blackstone’s Leiter argued against applying bank-like regulations to private credit firms. “We’re not doing the same activities as a bank,” he told the committee. “Banks take deposits… They run a business model that is more levered… and they have an asset-liability mismatch. When someone trusts us with capital, they do months of due diligence.” He emphasized that investors specifically seek exposure to these strategies and should not be subject to the same regulatory framework as traditional banking.