By David Henry Doyle
Key Takeaways
Regulators are moving from analysis of private markets to targeted framework updates, systemwide stress testing and data-driven surveillance.
Nonbank financial intermediation (NBFI) now underpins critical funding for infrastructure, digital transformation and economic growth, making its resilience a core policy priority.
Risk monitoring of private credit is intensifying, with the Financial Stability Board’s (FSB's) May 2026 report calling for enhanced oversight of connections between banks, insurers and private credit managers.
The UK's System-Wide Exploratory Scenarios (SWES) are pioneering a shift from institution- to ecosystem-level resilience testing, with France, the US and EU now following suit.
Since the FSB’s initial work on shadow banking in 2011, G20 policymakers have examined the growth, interconnectedness and potential vulnerabilities associated with NBFI and private markets. A new phase of the policy cycle focuses on how specific structures behave under stress, how risks are transmitted and what information is needed to manage them effectively.
What is NBFI?
The NBFI sector has been defined by the FSB as a broad grouping of financial institutions that are not central banks, banks or public financial institutions. The FSB has monitored NBFI since 2011, initially as part of its “shadow banking” work program, and subsequently as a dedicated workstream.
What is private credit?
While definitions vary, private credit involves the provision of debt financing to companies outside of public markets The private credit ecosystem includes a range of NBFIs such asset managers, insurers, pension funds, as well as banks. The FSB has noted that private credit is evolving from direct lending to medium-sized companies to now include lending to larger companies and an expansion of the investor base to become more accessible to retail investors.
How policy has shaped private markets
Policy has played a key role in enabling the growth of private markets over the last decade. Regulatory reforms initiated after the Great Recession like Basel III strengthened bank capital, liquidity and risk management standards. As a result, market-based finance and credit intermediation by NBFIs became more prominent.
These markets have since become an important source of financing for infrastructure, industrial transformation and economic growth. Yet episodes like the market stress of March 2020, the UK liability-driven investment crisis in 2022 and periods of volatility in private credit have demonstrated how liquidity pressures, leverage and interlinkages can amplify shocks across markets and institutions.
Many jurisdictions support a greater role for private capital participation in infrastructure, digital and energy transformations, as well as strategic investment priorities. This includes initiatives, particularly in the US and UK, aimed at expanding the investor access to private market opportunities. Policymakers therefore face the challenge of balancing the benefits of private market and NBFI finance while managing the risks associated with their continued growth.
From market stress to policy response
Following market stress in March 2020, the FSB launched a new NBFI work program covering money market funds, liquidity management, margining, leverage, data gaps and interconnectedness. According to the FSB, much of this foundational work at the international level has been completed. Supervisory attention is turning toward implementing initial findings, performing regional vulnerability assessments, and addressing remaining data challenges.
With an expanding investor base and growing role in funding the economy, private credit has emerged as a key area of supervisory and policy attention.
S&P Global’s Banks & Private Markets Outlook estimates the asset class exceeds $1.7 trillion globally, and private credit surveillance is now a central pillar of the global financial stability agenda.
The FSB’s May 2026 Report on Vulnerabilities in Private Credit highlighted the need for enhanced monitoring and a better understanding of connections between banks, insurers, private equity firms and private credit managers. The growing role of private credit in financing investment in AI infrastructure and data centers, may further reinforce supervisory and policy interest.
In the asset management sector, revisions to IOSCO’s recommendations on fund liquidity risk management and valuation practices reflect a broader effort to update existing frameworks to address potential vulnerabilities. The UK Financial Conduct Authority’s 2025 review of valuation practices resulted in new supervisory expectations on governance and market practice, and AIFMD II has introduced new requirements in the EU for loan origination, liquidity management and supervisory reporting.
Stress testing systemwide resilience
The UK is a useful case study of this shift. It has pioneered the use of System-Wide Exploratory Scenarios (SWES) to assess how the NBFI ecosystem could amplify stress across the financial system and impact the broader economy. The first SWES on NBFI was launched in 2024 and focused on the gilt, repo and corporate bond markets. In 2026, a second SWES will examine how private equity and private credit market participants would respond to a severe market downturn. Similar exercises mapping private credit and NBFI are now underway in France, led by Banque de France and the AMF, and the US, led by the Federal Reserve Banks of Dallas and New York.
The European Systemic Risk Board, European Central Bank and the European Commission also continue to monitor potential vulnerabilities associated with market-based finance. In September 2026, the European Commission requested a targeted assessment of private credit activities and exposures of EU banks and NBFIs from the European Supervisory Authorities. The objectives of this project are to identify common private credit definitions, map exposures, determine data and reporting gaps, assess retail investor participation and map the interconnections between banks and NBFIs.
These systemwide initiatives reflect a broader shift in regulatory thinking from assessing the resilience of individual institutions to examining how market participants’ collective behavior could amplify stress across the financial system and constrain funding to the economy. The findings will likely inform the next round of policy choices across major markets.
Building the information architecture
One of the most consistent themes raised across policy work is the need for better data. Private markets are often characterized by limited public disclosure, fragmented information and bespoke transaction structures. These characteristics make it more difficult for supervisors to identify, aggregate and assess leverage, liquidity and transmission risks across the financial system.
Priorities for policymakers and market participants include improving the identification and aggregation of private markets exposures, ensuring credit risk frameworks are tailored to specific risks and increasing the consistency and transparency of collateral and asset valuations. These data priorities will be central to how private markets surveillance evolves over the next policy cycle.
As market structures mature and expand, future policy expectations are likely to coalesce around questions of data quality, consistency and comparability to support greater transparency around how risks are measured, reported and valued. These policy, regulatory, and supervisory developments are not happening in isolation. Market-led developments in classifications, valuations, portfolio analytics and data are also becoming important components of the emerging risk management architecture. Asset managers, investors and financial information providers are also seeking better insight into portfolio exposures, counterparty risks and valuation practices.
Emerging priorities: What comes next?
A key outcome of this policy work is the recognition that private equity, private credit, infrastructure, real estate and other alternative assets present distinct leverage, liquidity, valuation and risk characteristics. Understanding the links between private and public markets, as well as bank and nonbank finance, will remain a priority.
The FSB has identified multiple areas for further investigation, including bank credit lines to private credit funds, revolving facilities to portfolio companies, financing arrangements and strategic partnerships, links between insurers and private equity firms, and cross-border exposures.
Given their expanding role in funding the economy, the central policy challenge will be to preserve the contribution of private markets and NBFI to capital formation and economic growth while ensuring that resilience keeps pace with their scale and complexity. In policy terms, private markets and NBFI are increasingly being treated not as alternatives to the financial system, but as core components of it.