Redemption caps and bank fightback test private credit’s role in retirement portfolios
Private credit’s push into retirement savings is colliding with redemption caps, rising credit risks and fresh regulatory attention — and policymakers now want a closer look at how that intersects with insurers and pension assets.
According to a Reuters Exclusive, the US Treasury Department plans to convene a series of meetings with domestic and international insurance regulators in the coming weeks to examine risks in the roughly US$2tn private credit market.
The first meeting could be announced as soon as Wednesday.
Reuters said US Treasury Secretary Scott Bessent has been preparing since January to hold regular consultations focused on liquidity, transparency and lending discipline in private credit, especially as the sector’s ties to regulated financial institutions deepen.
While the Treasury does not regulate insurance directly, Bessent aims to make the department a “convening authority, resource and forum” for all 50 US state insurance regulators.
Treasury officials want regulators’ views on several pressure points: the growing use of fund‑level leverage, the consistency of private credit ratings, offshore reinsurance and the liquidity of private credit investments.
Any policy responses would only follow after a series of consultations.
A US Treasury spokesperson did not immediately respond to a request for comment, according to Reuters.
In February remarks to the Economic Club of Dallas, Bessent made clear he is focused on the transmission of risk into pensions, banks, and insurance balance sheets.
As reported by Reuters, he said that when assets move from private credit lenders into regulated financial institutions such as pension funds, banks or captive insurance companies, “Treasury gets involved.”
He said he is “concerned with watching, how does this get to the regulated financial system,” and stressed that he wants to prevent contagion, according to Reuters.
Bessent noted that private credit helped “to bridge a gap in financing” when regulators tightened controls on banks after the 2008–09 financial crisis and again when bank lending froze during the COVID‑19 pandemic.
But he also said he wants to ensure private credit lenders have “been prudent in their loan portfolios.”
He added that individual investors through pension or 401(k) plans should be able “to take advantage of private credit assets,” while warning that the Treasury Department is part of the process for regulating how private assets move into individual investor accounts.
At the same time, the balance of power between private credit funds and banks is starting to shift.
CNBC reported that Wall Street banks may now have an opening to regain market share from private credit lenders after a decade in which direct lenders dominated leveraged buyout financing.
Moody’s chief economist Mark Zandi told CNBC in an email that “this is an opportune time for banks to regain market share from private credit funds.”
He said falling interest rates, looser banking regulation and the fact that “private credit lenders are also struggling” with the fallout of past aggressive lending have all shifted conditions in banks’ favour.
CNBC, citing PitchBook data, reported that banks’ share of buyout financings above US$1bn fell to 39 percent in 2023, down from about 80 percent in the previous five years, before recovering to just over 50 percent in 2025.
Zandi expects private credit to “experience more credit problems in the coming months,” pointing to higher borrowing costs, geopolitical tensions, and structural pressures in sectors such as software, as well as possible strain among consumer and healthcare borrowers.
On the regulatory front, Neuberger Berman chief investment officer Shannon Saccocia told CNBC she anticipates deregulation from the Trump administration, including a likely weakening of the Basel III “Endgame” implementation, with the US Treasury explicitly aiming to redirect business lending back into the US banking sector.
The Basel III framework, finalised in 2017, standardises how large banks calculate risk and sets a capital floor that has made bank lending less competitive versus private credit in recent years.
Saccocia said a weakening or reversal of those rules would increase competition for private credit lenders, a view CNBC said other market veterans share.
