US equities regulator 'closely monitoring' shaky private credit market

US securities regulators are "closely monitoring" problems in the private credit market seen as a rising risk, a senior Trump administration official said Tuesday.

In an address at the Washington Economic Club, Paul Atkins, chairman of the Securities and Exchange Commission, described "opacity" as a concern in a market that has grown in the wake of stiffer regulation on conventional banks after the 2008 financial crisis.

"The SEC is closely monitoring both the lending gap that private credit has filled and the emerging pressures that it has recently experienced, including elevated redemption requests and rising default rate projections," Atkins said.


Worries about the sector have percolated for months after bankruptcies last year pointed to problems of collateral being pledged to multiple debt holders. Investment giants such as Apollo Global and Blackstone saw large redemption requests in the first quarter.

Atkins urged caution before investing in private credit, the growth of which he described as a "natural result of the heavy-handed regulation that forced banks to get out of the business of financing small and growing enterprises," he said.

"Le me be clear that opacity in this space can be an issue, that valuation transparency and credit quality are key, that higher fees and less liquidity must be taken into account regarding the appropriateness of the investment," Atkins said.

Executives from large banks such as JPMorgan Chase and Goldman Sachs have described difficulties in the private credit market as a watch item but not a systemic risk.

Federal Reserve Chair Jerome Powell said late last month that the central bank is watching the space "super carefully" but doesn't see evidence of systemic risk, calling private credit "a relatively small part of a very large asset pool."