Federal Reserve Bank of New York staff have been meeting with major lenders since the spring to dig into how much private-credit risk sits on bank balance sheets, a pocket of finance that has rattled some investors and officials. The check-ins have included questions on risk controls and the quality of collateral tied to loans banks extend to private-credit firms.
Outreach has reached firms including JPMorgan, Wells Fargo, Barclays and Morgan Stanley, sources familiar with the matter told Semafor.
The visits are separate from the Fed’s routine on-site examinations and ongoing monitoring of bank risks.
In March, JPMorgan cut the stated value of a broad set of loans inside private-credit portfolios, which triggered the review. The people said the markdowns were concentrated in loans linked to software businesses facing pressure tied to artificial intelligence.
Bank lending to nonbank financial firms has climbed sharply, rising from about $300 billion in 2016 to more than $1.5 trillion, based on FDIC figures. Semafor said those credits now represent roughly 11% of total bank loans outstanding.
Regulators outside the U.S. have also been paying closer attention to private credit, with the European Central Bank widening its own review of banks tied to the market.
Last week, the SEC put private-credit managers on notice that a lack of readily available market data does not excuse weak valuation work as the asset class becomes a bigger part of investment portfolios.
In a statement, SEC Chief Accountant Kurt Hohl and Brian Daly, director of the agency’s Division of Investment Management, urged firms and auditors to take a closer look at how they value private assets and disclose the risks behind those valuations.
The Bank of England’s September Financial Policy Committee discussion, which said private credit could be exposed if financial conditions worsen. Earlier this year, the report said, some investors rushed to redeem money from certain private-credit funds amid worries about software exposure, though many funds limited withdrawals to 5%.
The warning comes as private-credit investments held by registered funds have surged nearly 60% since 2020, reaching $270 billion at the end of 2025 from $170 billion five years earlier, according to the SEC.
Private-credit lenders have faced criticism over how they set loan marks, especially when different firms price the same exposure differently or when weaker company performance doesn’t show up in valuations.
Redemption pressure has eased at a number of firms, and some investors have become more open again to software-related deals.
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