10.21.26 - Private Credit Closes In on Banks

The Fed produces its “Financial Accounts of the United States—Z.1” statistical release every March, June, September, and December. In the most recent release published in September, the Fed’s number crunchers did something new and interesting. They broke out private credit as its own category, freeing it from the other leftovers dumped in “unidentified miscellaneous liabilities.” That leftover is now worth about $1.1 trillion.

From Q4 2012 to Q2 2026, private credit grew from $90 billion to $1.12 trillion, a compounded annual growth rate of about 20%. Bank loans rose from $610 billion to $1.37 trillion, or roughly 6% per year. In 2012 private credit was about 15% the size of bank lending. Today, it’s nearly 82%. If these loans continue to grow at their historical rates, private credit loans will overtake bank loans by the first quarter of 2028.

However, you might also note that the private credit line has flattened over the past couple of quarters. In the first half of 2026, private credit loans grew by 3% while bank loans grew by 9%. The slowdown was concentrated in business development companies and similar funds sold to individual investors. Those investors, spooked by fears that AI would upend the software companies these funds lend to, were asking for more of their money back than the funds’ quarterly limits allow. Institutional private debt funds, whose investors can’t simply leave, kept on lending.