A new study by Franz Hinzen, Paul Rintamäki, Giorgio Mondini and Sascha Steffen challenges the regulatory alarm over private credit. While the IMF, BIS and central banks warn that the opaque asset class could magnify credit shocks, the authors argue it has actually softened the cycle. Their analysis covers more than 18,000 loans in the US private‑credit and broadly syndicated loan markets.

The US broadly syndicated loan (BSL) market sits at roughly $1.5 trillion, slightly larger than high‑yield bonds but smaller than private credit. The researchers found that over the past two decades, 25% of borrowers tapped both markets, a share that has climbed to almost 50% in the last few years. When leveraged‑loan spreads widen, firms—especially those backed by private‑equity sponsors—shift to private credit, boosting its market share.

Because private credit expands precisely when traditional loan channels contract, it acts as a backstop rather than a catalyst for instability. This counter‑cyclical behaviour dampens monetary transmission and curtails systemic risk, provided fundraising momentum persists. A break in that flow would remove the buffer, reviving concerns that regulators have long voiced for the broader financial system and market participants alike.