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How risky is the growth in US private credit?
JPMorgan CEO warns of hidden risks in private credit amid recent bankruptcies and $170 million losses, while bank exposure to nonbank lenders exceeds $1 trillion, S&P Global reports.
- Earlier this month, the bankruptcies of First Brands, US company, and Tricolor, US subprime auto lender, focused attention on the growth of lending outside traditional banks, both involving alleged fraud.
- In recent years, nonbank financial institutions expanded as conventional banks pulled back from some lending, while pandemic-era central bank policies increased liquidity, raising risks in private credit loans.
- On October 16, JPMorgan's CEO Jamie Dimon warned `you see one cockroach` after JPMorgan lost $170 million on Tricolor, while First Brands disclosed a $50 million hit tied to alleged fraud.
- Regulators signalled concern as the Federal Reserve included rapid NBFI asset quality deterioration in stress tests, while financial markets viewed events as watchworthy, not systemic, despite analyst warnings.
- Analysts warn that banks and NBFIs operate in an opaque structure complicating risk assessment, and rapid lending growth makes a future wobble likely, though officials say it is too soon to tell.
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US Banks’ Exposure to Private Equity Surges—Experts Warn of Potential Contagion
Following the bankruptcies of subprime auto lender Tricolor and auto parts supplier First Brands Group, which rattled the credit markets, a Moody’s report has sounded the alarm over U.S. banks’ high exposure to private equity and private credit. U.S. banks’ exposure to private equity has reached $300 billion, Moody’s Investors Service revealed in an Oct. 21 report. The credit agency stated that the increasing interdependence between banks and pr…
·New York, United States
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How risky is the growth in US private credit?
The recent bankruptcies of US companies First Brands and Tricolor have focused attention on risks associated with the growth in the private credit market, or lending outside traditional banks.
·Missoula, United States
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Coverage Details
Total News Sources65
Leaning Left4Leaning Right13Center17Last UpdatedBias Distribution50% Center
Bias Distribution
- 50% of the sources are Center
50% Center
12%
C 50%
R 38%
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