Second, private credit has emerged as a hugely influential power broker in our financial landscape. It has developed into a $1.7 trillion industry, spreading well beyond its founders’ initial purpose of serving middle-market borrowers. This massive expansion raises concerns of potential unseen fiscal contagion. As the sector moves away from its niche beginnings, it is assuming a bigger role in the global economy.
Historically, private credit operated on the fringes of the lending market, serving companies that struggled to secure financing through traditional banks. Growing demand for nonbank financing has pushed private credit front and center. With its capacity to offer tailored financial solutions, it has attracted a diverse array of borrowers seeking capital for growth and expansion.
As of July 6, 2025, the private credit sector has gone nuclear in its expansion. This fast growth has led to important questions about its effects on financial stability. Experts warned that the new industry presents potential dangers that could spill over into wider financial markets. Private credit is highly connected to the rest of the financial system. This interconnectedness can pass on shocks and risk a contagion effect in times of economic distress.
Our own Lee Ying Shan, a fellow with CNBC, took an in-depth look at these troubling issues last year. In her detailed analysis, she brings attention to the potential dangers that private credit’s skyrocketing growth poses. As firms turn to private lenders for more capital and liquidity, the risk of default and risk to liquidity exposure becomes heightened. This unfolding dynamic has the potential to create risk not only for borrowers but for the depository institutions that do business with them.
The sheer size of the private credit industry is impressive, perhaps a sign that corporations are changing how they seek their funding. Unlike in the past, now many firms are shifting their focus towards private lenders to enjoy more benefits. With the increased competition from them, traditional banks have continued to raise their lending standards. This trend is a part of a wider evolution within the financial space, where these alternative financing options are becoming more mainstreamed and adopted.
CNBC has been all over these developments, helping to explain them in depth across its multiple platforms. The network’s live TV service is available at cnbcfm.com/live-tv, offering continuous coverage of breaking financial news and live market analysis. Additionally, CNBC offers a Pro section for subscribers seeking in-depth analysis and expert commentary on market dynamics, accessible via cnbc.com/application/pro. For anyone who wants to see the latest market data and analysis, the Markets section can be found at cnbc.com/markets.