The queries by Fed examiners are intended to assess the level of stress in the private credit industry and the potential for it to spill over to the wider financial system, said the people, requesting anonymity to discuss the work. 

Among the queries the Fed has been incorporating into its routine oversight process, the central bank has been seeking detail on the debt private credit funds have taken on from banks. In good times, that debt can juice returns and make private credit funds more enticing. In bad times, it risks exposing banks to losses.

The Treasury Department is also questioning the insurance industry about exposures to private credit, said people with knowledge of those separate discussions.

Representatives for the Fed and Treasury had no immediate comment.

The questions are one of the strongest signals yet that US regulators are working to get a handle on the scale of the strains in private credit, which has ballooned to an $1.8 trillion industry marketed first to institutional investors and increasingly now to individuals.

Private credit, which relies on investor money — rather than bank deposits — to make loans, had been on examiners’ radar for years. They stepped up focus when retail credit funds came under pressure in the recent months and investors rushed to pull cash. 

Regulatory Push

A growing chorus of international regulators have been warning about the risks of private credit. Financial Stability Board Chair Andrew Bailey said this week that private credit may be facing more stress after the shock to markets from the Iran war. The Financial Stability Oversight Council said at the end of March that it had discussed recent developments in the private credit sector.

The Fed’s questioning comes as President Donald Trump’s top financial watchdogs seek to loosen rules for Wall Street lending giants. Part of that deregulation effort is meant to both bolster banks’ ability to lend to private-credit outfits and to have traditional lenders better compete with nonbank firms in areas such as mortgage and small-business loans.

The move also shows that officials such as Fed Vice Chair for Supervision Michelle Bowman want to balance relaxed rules with more strategic queries from the industry about what they perceive as potential areas of risk, said some of the people.

Banks have sought to distance themselves from their less regulated nonbank rivals. JPMorgan Chase & Co.’s Jamie Dimon warned that the private credit industry has a lack of transparency and poor valuation standards, but that he didn’t think private credit was a systemic risk, according to his latest CEO letter.

Wall Street and their private credit peers are deeply intertwined. Credit funds rely on banks to safeguard and custody assets. They also need banks for lines of credit. If private credit portfolios sour, this puts the collateral banks are lending against at risk. 

Blackstone Private Credit Fund had a debt-to-equity ratio of 0.7 times at the end of 2025, while Blue Owl Credit Income Corp.’s was 0.8 times as of Feb. 28. KKR FS Income Trust’s was about 0.7 times at the end of February.

Insurance Firms

The Fed questioning comes on top of another initiative at the Treasury Department to question insurers about their exposure. The regulator has put together a team to handle this, according to people familiar with the matter.

The Treasury is planning to meet with state regulators, which directly oversee insurers in the US, to discuss emerging risks and outlooks for the sector, the agency said in an April statement. The Treasury also expects to discuss it with international regulators, it said.

The review is expected to continue over the coming months and some financial firms may hold their own meetings with Treasury, the people said. 

In the last decade, insurance companies have fueled the rise of nonbank lenders, handing them more influence over vast pools of cash. Private credit players have used that money to make loans to businesses and parked them in complex investment structures.