The European Systemic Risk Board (ESRB) is examining the risks private credit poses to the region’s banks and economy, according to one of its advisers. The ESRB is focusing on the role of private credit in the macro-economic cycle, including its potential to spread or amplify financial shocks and its interconnectedness with Europe’s financial system.

Regulatory Oversight

The ESRB may recommend that regulators be given greater direct oversight of the $3.1 trillion shadow lending industry. Richard Portes, a member of the ESRB’s advisory committee, stated that the ESRB is concerned about the lack of transparency and the quality of lending standards in the private credit sector.

Regulators have struggled to assess the potential dangers to banks due to a dearth of data and the inability to force the unregulated industry to disclose information. The Bank of England and the European Central Bank have also expressed concerns about the risks posed by private credit.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.