Regulators expected to toughen rules on private credit

The private credit market will see tighter regulation over the next 12 to 18 months, according to industry executives.

New research from Nordic Trustee, part of capital markets services provider Ocorian, found that 79 per cent of private credit executives expect regulation to increase, with 15 per cent predicting a “significant” increase.

The survey of executives across the UK & Ireland, Germany, Switzerland, Benelux, the Nordics and Eastern Europe found that 65 per cent say private credit fund managers are “quite” well-equipped to meet regulatory standards.

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33 per cent say managers are “very” well equipped, while just two per cent say they are not very well-equipped at all.

Additionally, the survey found that private credit executives do not have a very high opinion of the current regulatory climate. Just 37 per cent say it is fit for purpose while 56 per cent say it needs improvement involving changes or less regulation. Around seven per cent say there is not enough regulation in their jurisdiction.

“Regulation of private credit will help drive standards and grow investor confidence and executives working in the market clearly expect it to increase in the immediate future,” said Cato Holmsen, chief executive at Nordic Trustee.

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“Regulation however has to strike a balance so that growth in the market in response to strong demand is not damaged while investors are also protected. Our study shows private credit executives want improvements whether it is changes to existing regulation or less regulation.”

Abi Reilly, partner and practice lead at Bovill Newgate added: “Whether in Europe or the UK, regulators are tightening their gaze on alternative investment sectors like private credit. AIFMD 2.0 is one of the clearest signals yet of that shift in Europe, and the FCA’s own consultation activity hints at similar priorities. Whether this next wave of reforms will deliver the transparency, consistency, and investor protection it promises – while maintaining room for innovation – is something we’ll see play out over time. What’s certain is that the private credit space is entering a more scrutinised phase, and readiness will become a defining feature for successful managers.”

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