News Digest:

The European Union (EU) has decided to clamp down on the fast growing $1.5 trillion private credit market with a new set of rules that seeks to curb leverage and reduce the risks to financial stability, a published report says.

Under the new laws agreed by member states, private debt funds will need to restrict the amount of borrowed money they can invest. Open-ended credit funds that are more liquid than traditional private credit funds, will also be subject to the new restrictions.

Takeaway:

The new rules were finalized recently after almost five months of deliberations. While these have not yet been formally published, analysts say this marks a significant ramping up of regulatory oversight around a relatively opaque asset class that’s seen significant growth in the wake of the global financial crisis. Private credit includes a range of strategies such as direct lending for leveraged buyouts and lending to distressed businesses, with the market being monopolized by Wall Street companies.

End Notes

Source: https://www.ft.com/content/2ab74817-5b14-4110-9815-a7549621b521