A growing dispute has emerged between European and U.S. financial regulators over access to data on the rapidly expanding private credit market, exposing a widening transatlantic divide over how to monitor risks in one of the fastest-growing corners of global finance.
European supervisors are seeking more detailed information about banks’ exposure to private credit investments, arguing that limited disclosure and increasingly complex financing structures make it difficult to assess whether risks could spread through the broader financial system.
U.S. Treasury officials, however, have pushed back against broader information-sharing, saying much of the requested data is confidential and warning that additional reporting requirements would impose unnecessary compliance costs on financial firms, according to several officials familiar with the discussions, who spoke to Reuters.
The disagreement comes as private credit has grown into an industry worth an estimated $2 trillion, with a significant portion of that market concentrated in the United States.
Private credit refers to loans made by non-bank lenders, such as investment funds and private asset managers, directly to companies rather than through traditional banks. The sector has expanded rapidly over the past decade as tighter banking regulations encouraged businesses to seek financing outside the conventional banking system.
The market has attracted investors seeking higher returns, but its rapid growth has also prompted regulators to question whether risks are becoming more difficult to identify because many private credit transactions occur outside public markets and are subject to less disclosure than traditional bank lending.
Those concerns have intensified following recent market strains, including redemption restrictions imposed by some investment funds and a series of high-profile corporate defaults that have raised questions about asset valuations and liquidity across the sector.
European authorities now want a much clearer understanding of the assets underlying private credit investments.
In particular, regulators are seeking detailed information about borrowers, loan valuations, collateral arrangements, and guarantees supporting those investments so they can determine where financial risks ultimately reside.
“We feel some resistance from some supervisors around the world,” Bundesbank Executive Board member Michael Theurer told Reuters.
“There are arguments that they are not allowed to share — they have legal restrictions. And then there is the general criticism that these are new reporting requirements, a new bureaucratic burden.”
According to officials, the discussions have taken place through international regulatory forums, including the Financial Stability Board (FSB), which coordinates financial stability efforts among major economies.
An FSB spokesperson acknowledged that inconsistent reporting standards and differing definitions across jurisdictions make it difficult to compare private credit risks internationally, reinforcing the need for more comprehensive disclosure and common reporting frameworks.
The dispute reflects broader differences between European and U.S. regulators over financial oversight. European authorities have generally favored more detailed supervisory reporting following the global financial crisis, while U.S. regulators have often expressed greater concern about expanding regulatory burdens on financial institutions.
The disagreement over private credit also comes against the backdrop of wider policy differences between Europe and the United States on issues ranging from financial regulation and technology to climate policy, trade, and international security.
For European regulators, the central concern is what supervisors describe as insufficient “look-through” visibility into private credit investment structures. Although existing data provides estimates of overall exposures, officials argue that aggregate figures fail to reveal where underlying risks are concentrated or how losses could spread through interconnected financial institutions.
Recent analysis by the European Central Bank (ECB) suggests that direct exposure to private credit remains relatively limited across the euro area. According to the ECB, euro zone banks hold an estimated €62.5 billion ($71.46 billion) in global private credit exposure, representing only 0.2% of total banking assets.
European insurers are estimated to hold approximately €211 billion, while pension funds account for another €52 billion in exposure. Those holdings are concentrated primarily among a relatively small number of large financial institutions in Germany, France, and the Netherlands.
Despite the modest aggregate figures, regulators say headline numbers no longer provide sufficient insight into potential vulnerabilities.
Officials are now concerned that private credit assets are being repackaged into increasingly complex investment structures, making it difficult to identify where risks ultimately sit within the financial system. Private credit loans can be bundled into collateralized loan obligations (CLOs), combined with leveraged loans, or incorporated into insurance-related investment structures before being sold to banks, insurers, pension funds, and other institutional investors.
As those assets move through multiple layers of the financial system, tracing the ultimate holder of the underlying risk becomes increasingly challenging.
“There are cascades of different investment layers — collateralized loan obligations, leveraged lending, asset-intensive reinsurances — and it is possible to combine all of them,” Theurer said.
“That makes the underlying risks opaque.”
The ECB recently conducted stress tests examining the impact of a severe downturn in global private credit markets. The analysis found that direct losses from private credit investments would likely remain manageable for banks and institutional investors.
However, the exercise also revealed a potentially more significant concern.
The greatest financial damage would likely arise not from defaults on private credit loans themselves but from broader market reactions, including falling asset prices and valuation losses spreading across interconnected financial institutions.
That finding has reinforced regulators’ belief that focusing solely on aggregate exposures may understate systemic risks.
“What kind of assets are underneath and how are they valued?” one European policymaker asked.
“Where is the money? Where is the risk?”
U.S. regulators have generally expressed greater confidence that the banking system remains resilient. In May, Federal Reserve Vice Chair for Supervision Michelle Bowman said default rates among non-bank lenders would need to become “abnormally high” before posing a significant threat to banks.
She also noted that loans provided by banks to private credit firms appear to be well collateralized, reducing the likelihood of substantial losses under current conditions.
At the same time, Bowman said the Federal Reserve is requiring banks to provide more detailed information about lending to non-bank financial institutions, allowing supervisors to better assess concentration risks within the financial system.
The statement is understood to mean that while U.S. regulators acknowledge the need for closer monitoring, they remain less convinced than their European counterparts that the current level of systemic risk warrants broader international data-sharing requirements.
For European supervisors, however, the absence of more granular information could eventually have regulatory consequences. Several officials have warned that if regulators cannot accurately determine where private credit risks reside, they may have little choice but to require banks under their supervision to hold additional capital against potential losses.
Such a move would increase the cost of financing for banks with private credit exposure and could reshape how European financial institutions participate in one of the world’s fastest-growing asset classes.
