European Regulators Clash With U.S. Treasury Over Private Credit Transparency

European financial regulators are facing resistance from the U.S. Treasury as they seek greater transparency into banks' exposure to the fast-growing private credit market, underscoring a widening regulatory divide between the United States and Europe.

European supervisors have become increasingly concerned about the roughly $2 trillion global private credit industry, much of which is concentrated in the U.S. Regulators warn that limited disclosure, opaque asset valuations, and complex funding structures could conceal risks capable of spreading across the broader financial system.

Recent market stress, including redemption limits at some private credit funds and several notable corporate defaults, has heightened calls for more detailed reporting. European authorities want access to information on underlying borrowers, valuation methods, and guarantees supporting private credit investments held by financial institutions.

However, U.S. Treasury officials have reportedly opposed broader data-sharing, arguing that much of the information is confidential and that additional reporting would create unnecessary compliance burdens for firms.

Bundesbank board member Michael Theurer acknowledged that some international supervisors have cited legal restrictions on sharing data, while others have criticized proposed reporting standards as adding excessive bureaucracy.

The issue has been discussed within international bodies, including the Financial Stability Board (FSB). An FSB spokesperson said inconsistent reporting standards and incomplete data make it difficult to compare private credit risks globally, reinforcing the need for improved disclosure and common reporting frameworks.

European policymakers have warned that if transparency does not improve, supervisors may require banks to hold additional capital against potential private credit risks.

Although the European Central Bank estimates eurozone banks have relatively modest direct exposure of about €62.5 billion, or 0.2% of total assets, officials say aggregate figures fail to reveal where underlying risks are concentrated. Insurers and pension funds also hold significant investments, particularly in Germany, France, and the Netherlands.

Supervisors are increasingly focused on how private credit assets are packaged through structures such as collateralized loan obligations and leveraged lending, creating interconnected risks across banks, insurers, and pension funds.

While the ECB concluded that direct losses from a severe private credit shock would likely remain manageable, it warned that wider market selloffs and valuation declines could amplify financial instability. Meanwhile, Federal Reserve Vice Chair for Supervision Michelle Bowman has said bank lending to private credit firms remains well collateralized, though the Fed is expanding reporting requirements to better monitor concentration risks.