RSM UK and Fieldfisher warn private credit growth poses systemic risks
Updated
Updated · Pensions Age · May 8
RSM UK and Fieldfisher warn private credit growth poses systemic risks
7 articles · Updated · Pensions Age · May 8
The report says UK defined benefit pension schemes have become a major funding source, with FCA, PRA and Bank of England scrutiny rising over valuations, leverage and links with insurers.
It says Solvency II and Mansion House reforms are accelerating investment into private markets, while opaque structures, infrequent mark-to-market pricing and “double dipping” may obscure risks and complicate recoveries.
The authors cite Tricolor’s collapse and issues at First Brands as governance warnings, but say investor demand remains strong and consolidation among weaker lenders is likely.
Is the private credit boom a smart investment for UK pensions or the seed of the next financial crisis?
After major bankruptcies revealed fraud, is the opaque private credit market a ticking time bomb for retirement savings?
Rising Threats in UK Private Credit: $3 Trillion Market Faces Liquidity, Transparency, and Governance Crises
Overview
The private credit market has rapidly grown to $3 trillion globally, raising serious concerns from UK regulators about its untested resilience amid vulnerabilities like leverage, opaque valuations, and collateral reuse. High-profile collapses of firms such as Tricolor exposed risks of fraud and weak underwriting, triggering significant losses for lenders and a wave of investor redemptions that forced liquidity restrictions. In response, regulators are intensifying oversight, including new reporting requirements and stress tests, while warning that the growing use of funded reinsurance in pension schemes may threaten financial stability. However, global coordination faces challenges due to US market dominance and regulatory arbitrage, complicating efforts to manage systemic risks in this expanding, interconnected sector.