On October 7th, the ACC published a critique of several NY Fed publications that made erroneous points about the potential for nonbanks, including private credit, to pose systemic risk to the financial system.

Contrary to the NY Fed's assertion that private credit funds and others are dependent upon banks for their short-term and long-term stability, the paper explains the very safe and stable private credit business model and its complementary relationship with banks. It also explains why private credit funds low leverage, less maturity transformation and ample liquidity risk management tools make them a safer form of finance for the real economy. Banks' senior, secured lending to private credit funds is also safer than direct lending to corporations. The paper also warns of the adverse impacts to capital markets and the economy if regulators were to implement the variety of ex-ante or state-specific policy proposals floated in the NY Fed papers.

The full paper can be found here.

For further information, please contact Joe Engelhard, Head of Private Credit and Asset Management Policy, Americas.