Private Credit: Growth vs. Regulatory Response

Overview

The private credit sector has been growing rapidly in 2025 but is the evolution of regulation keeping pace with growth?  Against the backdrop of a relatively fragmented global regulatory landscape, this year regulatory bodies have expressed their views for the need for greater transparency and risk monitoring, especially as retail investors gain exposure to this maturing asset class.  IOSCO’s 2023–2025 work programme prioritises risks in private finance, including private credit, highlighting opacity, leverage and conflicts of interest as systemic concerns.  Further, the Chair of the Financial Stability Board published a letter in November to G20 Leaders highlighting the increasing role of non-bank financial intermediaries in global financial markets, particularly in government bond markets and private credit markets, which have grown to an estimated US$2 trillion globally and confirmed its commitment to assessing the implications of these changes for the resilience of the financial system and ensuring that the evolution of non-bank finance does not compromise financial stability.  

Perhaps spurred on by implementation of the new loan origination regime for alternative investment funds in the EU, we are beginning to see some traction elsewhere towards regional regulatory alignment.  Here is a quick snapshot of some recent regulatory developments by region in the private credit sector that the team at Rulefinder Cross-Border Lending have been keeping a close eye on.

EU - harmonised EU rules for loan origination by funds

Progress on implementation of AIFMD 2 into national laws continues to be made by various Member States in advance of the 16 April 2026 deadline.  AIFMD 2 brings with it the introduction of new rules which aim to establish an efficient internal market for loan origination by alternative investment funds (AIFs).  Our AIFMD 2 Tracker identifies which jurisdictions currently have a restricted position for loan origination activities by AIFs and whether the position is expected to change, including where AIFs will be permitted to grant loans to consumers.

Whilst AIFMD 2 strives to introduce a harmonised framework for loan origination by eliminating inconsistencies in regulation applicable to funds which originate loans across Member States, it is possible that there may be both delays in transposition and that Member States may add their own quirks/nuances. Any gold-plating may mean that loan origination activities across the EU will still not be completely harmonised.

UK – foundations being laid for increased oversight?

Earlier on in March 2025, the UK’s FCA published a report reviewing the valuation processes for private market assets, including private credit that concluded that whilst there are examples of good practices in firms’ valuation processes, there are areas where firms can improve.  The FCA plans to further review conflicts of interest in private markets and to consider any changes required to the UK’s regulatory framework for AIF managers.  Meanwhile, the Bank of England has been assessing the increasing role played by non-bank finance in the provision of credit as a feature of the financial system. There is a general expectation in the industry of increased regulation within the next 12–18 months in an attempt to drive standards and grow investor confidence.  

US – on the SEC’s radar

Throughout 2025, there have been several examples of the SEC intensifying its oversight of valuation practices and liquidity risks of the private credit sector in the US, particularly given some high-profile collapses during the year. In November 2025, the SEC’s Division of Examinations released its priorities for 2026, signalling that it will be turning its attention to private credit as an alternative investment strategy, particularly when retail investors are invested in products exposed to the risks of private credit. 

Australia – on a mission to improve standards

As a result of ASIC’s heightened focus on the Australian private credit market, the sector is undergoing reform with an intention of improving standards and enhancing market integrity.  In November 2025, ASIC announced as part of its 2026 enforcement priorities that it will sharpen its focus on poor practices in the private credit sector, noting that ASIC’s recent surveillance of private credit funds highlighted ‘significant room for improvement’.  This followed their release of a surveillance report on private credit funds that identified failings in the sector and opportunities for improvements as to how these funds manage key risks that are critical to investor confidence and market operation. In December 2025, ASIC published a catalogue outlining key legal obligations for retail and wholesale private credit fund operators, aimed at helping operators comply with existing rules and enhancing trust in the growing sector.

We expect ASIC to refresh its regulatory guidance in 2026 and note that ASIC intends to conduct further targeted surveillances with a particular focus on the distribution practices, fees and management of conflicts of interest of funds engaged in real estate lending. 

Asia – shift in approach coming?

In Asia, the private credit sector, for the most part, remains bespoke and fragmented, with significant variations in how permissive or restrictive cross-border lending activities are for non-bank lenders.  For example, Singapore has a workable regime and is considered a creditor friendly jurisdiction as compared to Japan where, for loan origination, a local presence as a registered money lender is required, unless an alternative structure can be used.   However, there are signs that the market is shifting from a niche to more mainstream asset class, a trend that will likely bring with it a fresh look at whether a more aligned regulatory landscape in terms of licensing requirements, creditor rights and foreign exchange controls would unlock the region’s potential.