Bank of Canada monitors $500 billion private credit exposure

The Bank of Canada is monitoring the growth of private credit, an alternative lending model involving non-bank lenders such as asset managers, insurers, and pension funds. The central bank estimates that Canadian investors and banks have a combined exposure of approximately $500 billion to these loans, much of which is located in the United States.

While the share of Canadian businesses utilizing private credit has remained steady at about 15 per cent over the last decade, the central bank noted that Canadian firms are often underwriting these loans rather than just borrowing them. Although the model provides fast and flexible capital for mid-sized businesses, its rapid global adoption has been linked to high-profile bankruptcies in other markets, including the United States.