The University of Chicago Business Law Review
Start Page
256
Abstract
Private credit, a financing method where non-bank lenders provide loans to predominantly middle-market businesses, has experienced exponential growth since the 2008 financial crisis, with its offerings, client base, and collaborations with other market participants expanding significantly. Recent trends highlight regulatory acceptance of this growth and increased interconnectedness between private credit and the broader financial industry, as private credit firms form numerous new partnerships with traditional lenders and deposit-taking institutions. These developments have raised concerns about systemic risk, the potential for financial instability in private credit to spread to the broader financial system, and how to deal with increased exposure to this type of risk. This Comment examines the history, growth, and systemic risk implications of private credit, proposing a regulatory framework or “system” designed to mitigate the negative spillovers of these developments. This system emphasizes enhanced disclosure requirements, stricter capital reserves, leverage limitations, restrictions on certain investment activities, and covenant drafting to ensure financial containment of the systemic risks associated with private credit.
Recommended Citation
O’Malley, Kyle
(2025)
"Creating a System to Deal with the Systemic Risk in Private Credit,"
The University of Chicago Business Law Review: Vol. 5:
No.
1, Article 7.
Available at:
https://chicagounbound.uchicago.edu/ucblr/vol5/iss1/7