What does bank retrenchment mean for private credit investors?

After the 2008 global financial crisis (GFC), more stringent regulations led to banks cutting lending. Our research indicates that banks have remained the principal providers of debt financing, although over the last ten years alternative lenders have made meaningful advances, particularly in infrastructure.

2023 saw a return of bank retrenchment following sharp monetary tightening and the banking crisis in the US. In our view, macroeconomic uncertainty is likely to prolong this situation for some time, meaning private credit could grow significantly as a proportion of the broader capital markets.

In this note, Private Credit Research Manager Lushan Sun outlines her view that global economic uncertainty could prolong this situation for some time – with the potential outcome of private credit growing significantly as a proportion of the broader capital markets.

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