SKN | Private Credit’s Regulatory Blind Spot: What HNW Families Should Demand From Their Banks

Key Takeaways

• Global regulators are increasingly concerned that private credit has grown faster than the transparency needed to understand its true risks.
• The Financial Stability Board estimates global private credit assets at $1.5–2 trillion, with significant connections to banks, insurers and private-equity firms.
• For HNW families, the principal issue is not whether private credit belongs in a portfolio, but whether its valuation, leverage, liquidity and underlying borrower exposure can actually be understood.
• Zurich and Geneva private banks should be required to map private-credit exposure across funds, lending facilities, collateral and shared borrowers rather than assessing each position independently.

Private credit has become too large and too interconnected for regulators to treat it as a niche corner of alternative finance. The Financial Stability Board estimates the global market at $1.5–2 trillion, while European supervisors are now warning about limited transparency, infrequent valuations, leverage and liquidity mismatches. The important message for HNW families is not that private credit is inherently problematic. It is that the traditional information advantage enjoyed by sophisticated investors is becoming harder to maintain when the underlying exposures are private, valuations are infrequent and the same borrowers can appear across multiple layers of the financial system.

Stop Measuring Private Credit by Yield Alone

Private credit has expanded because it offers borrowers flexible financing and investors access to floating-rate income and negotiated structures. That flexibility can be valuable, but it also makes comparison with publicly traded bonds misleading.

A quoted bond provides continuous market pricing. A privately negotiated loan may be valued periodically using models, private ratings or manager assessments. During stable conditions, the difference can appear academic. During stress, it becomes central.

HNW investors should therefore ask how often loans are independently valued, how impaired assets are treated and what assumptions determine recovery values. A stable net asset value does not necessarily mean that underlying credit risk is stable.

Map the Bank Exposure Behind the Private Fund

The regulatory concern becomes more relevant because private credit does not sit outside the banking system. Banks provide revolving credit facilities, financing and other services to private-credit funds. They can also lend to companies that are simultaneously financed by private-credit managers.

The FSB identified around $220 billion of drawn and undrawn bank credit lines to private-credit funds across reporting jurisdictions, while commercial estimates are considerably higher. European Banking Authority data separately showed almost €150 billion of exposure by EU and EEA banks to private-credit funds and related asset managers as of June 2025.

For a family using Lombard financing, this creates an important due-diligence question: is the same institution simultaneously your private bank, lender to an investment vehicle and counterparty to assets held elsewhere in the structure?

Treat Liquidity Mismatch as a Wealth-Architecture Risk

Private loans are inherently less liquid than listed securities, yet some private-credit funds offer investors periodic redemption windows. Regulators are increasingly focused on what happens when redemption demand rises while the underlying loans cannot be sold quickly without accepting substantial discounts.

That mismatch matters to HNW families because liquidity needs are often least flexible during periods of market stress. A family may face tax obligations, capital calls, property commitments or business requirements precisely when private assets become difficult to monetise.

Private-credit allocations should therefore be separated from the liquidity reserve supporting near-term family obligations. The two pools serve different purposes.

Ask Your Swiss Bank to Aggregate the Risk

A sophisticated Zurich or Geneva private bank should be able to look across the family’s entire relationship rather than analysing every investment independently.

Ask the bank to identify direct private-credit holdings, exposure through funds, financing provided to private-credit vehicles, shared corporate borrowers, collateral dependencies and any concentration in sectors such as technology, healthcare or business services. The FSB has specifically highlighted the difficulty of aggregating exposures when structures and disclosures are fragmented.

This is where private-banking advice should move beyond product selection. The real service is understanding how seemingly separate exposures could behave together under stress.

Build a Stress Test Around Valuation, Not Just Defaults

The appropriate stress test is broader than a higher default assumption. Families should model lower recovery values, slower repayments, reduced redemption capacity, tighter bank financing and wider collateral haircuts at the same time.

That exercise can reveal whether the family’s liquidity architecture depends on private assets remaining continuously valued at today’s assumptions.

The regulatory message is becoming clear: the question is no longer whether private credit deserves more scrutiny. It is whether investors, banks and regulators can see enough of the underlying structure to understand where losses would travel.

For HNW families, transparency is therefore a form of risk control. For a confidential discussion regarding your private-credit exposure, Swiss banking relationships and cross-border wealth architecture, contact our senior advisory team.