Treasury seeks details from private credit firms on financial links

Treasury is asking private credit firms how they are funded, how they price risk and how closely they are tied to banks, insurers and reinsurers, a sign Washington is trying to map a fast-growing corner of shadow finance before losses migrate into the regulated system.

The inquiry comes as private credit has swelled into a major lender outside traditional banks. The Federal Reserve said U.S. private credit totaled about $1.34 trillion in the second quarter of 2024 and nearly $2 trillion globally, roughly five times the size of the market in 2009. Over the same period, banks’ committed lending to private credit vehicles climbed from about $8 billion in the first quarter of 2013 to around $95 billion by the end of 2024, showing that the sector is not insulated from the banking system but increasingly financed through it.

Scott Bessent has framed the issue as a spillover problem. In remarks in Dallas in February, he said Treasury becomes involved when assets move into regulated institutions such as pension funds, banks or captive insurance companies, and he said he wanted to understand how private credit affects the broader economy and prevent contagion. Treasury also announced on April 1 that it would convene meetings with domestic and international insurance regulators on private credit markets, with sessions set to run from April into early May.

Officials are looking for data that the market has not historically made easy to see. Treasury has sought feedback on fund-level leverage, the consistency of private-credit ratings, offshore reinsurance and liquidity. The Office of Financial Research estimated that counterparty exposure to private credit runs from $410 billion to $540 billion through debt financing and another $300 billion through limited partner capital commitments, a scale that makes even modest losses worth watching closely.

The fear is not just direct lending losses. Private lenders often rely on credit facilities, warehouse lines and syndication arrangements that can tie them back to banks. Insurers and reinsurers have also become important buyers of private-credit assets, especially collateralized loan obligations. The National Association of Insurance Commissioners said U.S. insurers held $276.8 billion in CLOs at year-end 2024, equal to about 5.1% of total bonds and 3.1% of total cash and invested assets. About 80% of those holdings were investment grade or higher, including 39% rated AAA, but regulators remain focused on concentration and complexity.

That caution has sharpened after a run of credit-market strain. The Office of Financial Research pointed to the September 2025 bankruptcies of First Brands Group and Tricolor, which followed allegations of fraudulent activity, and a February 2026 selloff in software loans that hit broadly syndicated loan and private credit markets. The Federal Reserve has already asked major U.S. banks for details about their private-credit exposure, and Treasury has separately been questioning the insurance industry. Together, those moves suggest a wider reconnaissance effort, aimed at finding out where leverage, funding lines and opaque valuations could turn a private credit shock into a broader financial problem.