Private Credit Makes Bank Investors Antsy, Too: Paul J. Davies

Banks making loans to specialist fund managers instead of directly to companies is meant to act like a firebreak protecting traditional lenders against the risks of businesses going bust. But losses from financing private credit firms and other nonbank lenders are coming back to bite them — and it’s making their investors antsy.

While the direct exposure of most banks to private credit is a sliver of their lending, they still need to reassure shareholders that standards have been exacting and that they have proper oversight of the collateral pledged by borrowers.

A string of blowups in recent months has already led to losses ...