The market regulators can’t fully see
Private credit, where a business borrows from a private investment firm rather than a bank or public bond market, has grown from a post-GFC niche into one of the defining features of global corporate finance. The IMF estimates the global market has topped US$2.1 trillion in assets and committed capital, and forecasts it will reach US$3.5 trillion by the end of 2028. The Bank of England put the figure at US$1.8 trillion in 2024, roughly four times its 2015 size, while warning that patchy data means the true number could be considerably larger.
The attraction is real. Private credit offers tailored finance for companies that fall outside a bank’s risk appetite, and diversification for investors chasing yield. But the IMF’s structural warning from 2024 still cuts to the core of the problem: “the migration of this lending from regulated banks and more transparent public markets to the more opaque world of private credit creates potential risks. Valuation is infrequent, credit quality isn’t always clear or easy to assess, and it’s hard to understand how systemic risks may be building.”
The alarm bells got louder this month
In July 2026 the concern reached a new pitch. The EU’s financial stability watchdog began examining the risks private credit poses to the region’s banks and economy, and Australia’s central bank is bracing for mounting defaults and worried about highly concentrated property loan books among private credit fund managers. Britain’s Financial Stability Board stated in May 2026 that the sector “remains untested in a prolonged economic downturn”, with high leverage and concentration potentially amplifying stress.
Real defaults are already surfacing. Auto parts maker First Brands and subprime lender Tricolor have both been linked to private credit markets. The AI investment boom adds a fresh concentration risk, with many funds holding debt of AI-linked firms whose valuations remain highly uncertain.
What the RBNZ is watching
The Reserve Bank of New Zealand’s May 2026 financial stability report lifted its concern about the sector, warning that “rapid growth in private credit over the past decade means any strains in the sector could reduce credit availability for firms and amplify economic downturns”. It added that “limited transparency and oversight makes it hard for regulators to determine the level of risk and to respond accordingly”. Declining investor sentiment has already driven up withdrawals from private credit firms globally.
When the RBNZ first flagged the sector in July 2024, it noted New Zealand banks’ direct exposure to private capital investors was relatively low and concentrated in non-cyclical industries. That position appears to hold, but the global backdrop has clearly deteriorated.
Small here, but growing fast
New Zealand’s market is modest by world standards. RBNZ sector lending data for April 2026 shows non-bank lending institutions held $9,735 million in business lending against $132,877 million for registered banks, with total business lending growing 4.3% year-on-year. In personal consumer lending, though, non-bank lenders are already dominant, holding 49.3% of the market.
Matt Goodson, managing director at Salt Funds Management, offered a measured local read in the NZ Herald on 16 July 2026. “It’s interesting globally, but it’s not really of great importance here at this stage,” he said, adding that the local version of the risk sits “in the murky area of private business lending that’s often in Australia and New Zealand mezzanine property debt”. He is not aware of any large local funds carrying that debt at overly optimistic prices. In March 2025, NBR reported that as Kiwi investors and borrowers grow comfortable with private credit, concerns are growing across the Tasman, and by March 2026 the outlet warned the next bout of financial stress may not come from banks at all.
The risk that actually lands on your desk
The practical danger for a New Zealand business owner is not that their bank collapses because of a US default. It is more immediate and more subtle. Firms that have built funding structures around private credit facilities, whether for working capital, growth or property development, are relying on lenders whose own capital base can be squeezed by investor redemptions. When sentiment turns, private credit lenders can gate withdrawals, tighten covenants and pull back from new lending far faster than a regulated bank ever would.
That is the sting in the RBNZ’s warning about reduced credit availability. Unlike a bank, a private credit fund’s position is not publicly reported, its loan book is not independently stress-tested, and its ability to keep lending in a downturn is backed by no deposit guarantee and no central bank facility. The same opacity that unsettles regulators is what makes it hard for a borrower to judge the stability of their own lender.
Non-bank capital has genuine uses, and for many firms it is the only door open. But looser access is not the same as safer money. The lesson from the global alarm bells is to know exactly who is funding you, on what terms, and how quickly that door can close.
Sources
- Private credit markets: Should we be worried? – Stock Takes (2026-07-16)
- RBNZ to keep an eye on private credit (2024-07-08)