Despite rising concern around segments of the private credit market, senior leaders from Europe’s largest banks signaled confidence in their institutions’ exposure and downplayed the likelihood of major risks for the industry.
Speaking at Morgan Stanley’s European Financials Conference in London, CEOs and CFOs of firms that operate across financial services globally emphasized that credit markets have behaved consistently for more than a decade and that the segment is now undergoing a natural correction.
Conference attendees noted that recent issues in private credit have been caused by isolated players with less experience in the business, rather than systemic problems in the financial industry.
Post‑Crisis Shifts Under Scrutiny
Since the global financial crisis of 2007–2009, traditional banks have reduced their balance‑sheet exposure to credit intermediation, opening the door for non‑bank lenders to expand in that market. After years of strong inflows and stable returns, however, concerns have increased in recent months—particularly around private credit’s concentration in the software sector.
A poll conducted during the conference found:
- 41% of respondents identified private credit as the top short-term risk for European banks, followed by:
- 23%: disappointing loan growth
- 16%: the possibility of interest rates falling below 2%
- 13%: potential disappointment with capital returns
- 7%: AI disruption
(More than 650 investors from 120 firms attended the event. Not all responded to the poll.)
“Although executives acknowledge the risks for private credit funds, it isn’t clear how this situation could translate into bank losses,” said Giulia Aurora Miotto, who covers European banks at Morgan Stanley Research. “It’s a reassuring message for now.”
Despite the confidence in the health of the financial industry—with some C-level executives forecasting that provisions might even be lower this year—banks are monitoring the situation in credit markets more closely as part of their risk management processes.
For leaders of the industry, private credit plays an important role in supporting economic expansion and should continue to do so. CEOs and CFOs pointed to potential stress tests by bank regulators as an initiative that could increase transparency and reinforce investor confidence in the sector.
