Private credit is now a $2 trillion visibility problem The FSB’s warning on private credit is not really about one scary corner of lending suddenly getting too big. It is about a market now estimated at $1.5 trillion to $2 trillion where the basic map is still incomplete. That is the problem. Private credit is no longer a neat alternative channel for mid-market borrowers that banks decided not to touch. It now sits across banks, asset managers, insurers, private equity structures, semi-liquid vehicles, fund finance, revolving facilities, and strategic partnerships. The risk is not just credit losses. The risk is that nobody has a clean, standardized view of where the losses would land. Opacity is the trade The FSB flagged the obvious fault lines: lack of granular fund and loan-level data, no harmonized global definitions, opaque valuation practices, private ratings, leverage, liquidity mismatches, and concentrated lending into sectors like technology, healthcare, and services. None of that matters much in a benign tape. It matters when marks get challenged, refinancing windows close, and “held at par” starts looking like a negotiation rather than a valuation. Payment-in-kind usage has increased, defaults are rising from low levels, and the borrower base tends to be lower quality and more levered than comparable public-market borrowers. That is exactly where private markets can look calm right up until they are not. Banks are still in the room The comforting line is that direct bank exposure looks small. The less comforting line is that the FSB found about $220 billion of drawn and undrawn bank credit lines to private credit funds, while commercial estimates run as high as $270 billion to $500 billion. Banks may not own all the loans, but they finance the ecosystem, provide revolvers, structure risk transfers, and partner with the managers. Insurers matter too, because yield-hungry balance sheets have been pulled deeper into private credit through allocations, ratings, and asset-manager relationships. This is the second-order issue. Private credit may be private, but the funding links are not isolated. Bottom line: private credit does not need to be “the next 2008” to be a systemic problem; it only needs to be large, levered, interconnected, and poorly visible when the cycle finally turns.