The European Central Bank launches a new round of private bank credit exposure inspections

Insiders say that as concerns about the quality of loans in the private credit sector intensify, the European Central Bank will launch a new round of inspections of the banks it supervises.

Insiders said the ECB plans to require banks to provide detailed information about their dealings with direct lending counterparties. Because the matter is not public, these people asked to remain anonymous. They said that similar actions in the past have involved around a dozen-plus banks.

A spokesperson for the ECB declined to comment.

A string of high-profile blowup events since last year, along with a surge in redemptions from private credit funds, has led the market to worry about how much risk exposure traditional banks actually have in this $1.8 trillion industry. In the euro area, lending institutions such as Deutsche Bank and Société Générale have tried to reassure the market, saying they do not believe the sector would pose a systemic risk.

While the action planned by the ECB is based on similar work in 2024 and 2025, euro-area regulators told Bloomberg that recent developments have highlighted its importance. Insiders said the ECB wants to ensure that banks understand the risks they face.

Boris Vujcic, a member of the ECB’s Executive Board, said in an interview with Bloomberg in Zagreb that euro-area banks’ overall exposure to private credit “is manageable,” but the sector “clearly” poses risks.

“We’ve already seen, in a number of cases, the quality of private credit investment portfolios deteriorate,” said the governor of Croatia’s central bank, who is set to become the ECB’s vice president in June. “And if contagion occurs, we must make sure the financial system remains stable.”

Insiders said the ECB is following up on shortcomings it found when assessing banks’ links to private credit last year.

The ECB previously found that banks were unable to correctly identify the specific nature and extent of their links to private credit funds.

Patrick Montagner, a member of the ECB’s Supervisory Board, said that overall, the ECB is seeking to close a data gap related to non-bank financial institutions.

Keefe, Bruyette & Woods analysts wrote in a report on Monday that European banks’ exposure to private credit is roughly 1% to 2%. They noted that the figure is higher among large banks such as Deutsche Bank, BNP Paribas, and Société Générale.

Analysts said it is currently unclear whether European banks will suffer credit losses from these exposures because nearly all of the underlying loans are collateralized, with a loan-to-value ratio of about 60%. “Even so, the news will keep coming and could continue to weigh down valuations of the banks with the biggest exposures,” they said.

Massive information, precise interpretation—available on the Sina Finance app

责任编辑：丁文武