Already a subscriber?More than a tenth of business financing is coming from non-bank lenders amid a boom in private credit and as big banks avoid construction and other industries where borrower stress is rising, the Reserve Bank says.has exploded in popularity in the past 12 months. As banks have deserted some credit customers to protect their balance sheets in a structural trend dating back to the global financial crisis, it has created an opportunity for private credit to step up.
“Around 11 per cent of business lending and one-quarter of lending to small businesses was provided by RFCs,” the central bank said in its half-yearly Financial Stability Review, released on Thursday. “RFCs have expanded their share of business lending by targeting areas that are less serviced by banks.”The RBA’s warnings follow increasing interest from big investors in private credit.
“It’s an area that needs stronger regulation to ensure we don’t face issues such as liquidity risk due to lower standards of transparency,” he said. “Investors are relying on the expertise of the manager. They need to understand the track record, what risk limits does it employ and how does it ensure appropriate diversification across loan size, sectors and geography.”