(Finance) – In a preview of the semi-annual financial stability report (Gfsr) which will be published next week, the International Monetary Fund found that the sector of private credit (corporate private credit), usually secured loans provided by entities such as asset managers or funds to companies not large enough to be able to independently issue debt securities, has seen strong expansion in recent years and has proven efficient in supporting different types of companies. But now he also presents “vulnerability And potential risks for financial stability”.
According to the IMF the use of this channel by many companies has meant that the related credit flows have moved from the traditional banking sector and markets, with their characteristics of transparency, towards “a more opaque environment” and from this arise “potential risks”. Furthermore, the groups that provide this type of financing “they tend to be smaller and riskier” than counterparties that typically engage in these assets. Furthermore, the sector has never witnessed a serious downward correction and “in an adverse scenario of this type” it could end up favoring strong increases in insolvencies and of market devaluations.
Private credit, IMF: more opaque sector, risks to financial stability
