Fed's $1.4T Private Credit Market Shift and Future Implications

Federal Reserve Vice Chair Michelle Bowman stated that regulatory changes have shifted corporate lending from banks into the $1.4 trillion private credit market. The bank share of corporate lending fell from 48% in 2015 to 29% in 2025. The Fed plans to recalibrate the Basel III framework, reducing the risk weight on loans to investment-grade borrowers from 100% to 65%. This change aims to balance the lending landscape between banks and private credit providers while addressing rising risks in the non-banking sector, echoing concerns from recent bankruptcies and software sector exposure related to AI disruptions.