There is growing regulatory scrutiny around the world when it comes to private credit markets, particularly after questions around valuations, liquidity and credit ratings have been raised following widely publicised issues in the US.
But there seems to be quite a variance on the areas regulators are focusing on and their approach.
The most consequential change is the EU’s Alternative Investment Fund Managers Directive (AIFMD II), which started applying from 16 April 2026. It creates a new category of “loan-originating” funds, which captures most private credit vehicles, and imposes hard leverage caps of 175 per cent of net asset value for open-ended funds and 300 per cent for closed-ended ones.
In Europe, the European Securities and Markets Authority (ESMA) is also looking into private credit ratings, and asked the industry to send comments by the end of May.
The UK is using its post-Brexit flexibility to prioritise growth and looking to get rid of some rules it deems too rigid, for example repealing AIFMD-derived legislation and removing the thresholds that currently push smaller managers into the full-scope regime.
Read more: Private credit faces tougher EU rules under AIFMD II
Meanwhile, in the US, the focus has been on opening up access, with the Department of Labor (DOL) proposing a rule that would let 401(k) plans channel retirement savings into private credit and other alternatives via a fiduciary safe harbor weighing performance, fees, liquidity, valuation, benchmarks, and complexity. The Securities and Exchange Commission, meanwhile, has flagged that private credit among its 2026 examination priorities.
The Australian Securities and Investments Commission has made poor private credit practices a 2026 enforcement priority, targeting fee transparency, conflicts, and valuations after finding widespread shortcomings.
And in Hong Kong new fund tax changes covering private credit provide an exemption for carried interest and performance fees, which will be a welcome move for fund managers.
Finally, globally, the Financial Stability Board warned in a recent report that private credit’s concentration, and bank interlinkages remain untested in a downturn. It is encouraging authorities particularly to close data gaps and enhance monitoring, so there could be further publications related to this in due course.
Read more: New rule proposed for selecting 401(k) alts investments
What to watch for in the second half of the year:
- The comment period on the safe harbor proposed by the DOL in the US closed on 1 June, so a final rule is expected later in the year.
- EU AIFMD II transposition: Although the main rules apply from April 2026, the ESMA technical standards and guidelines are still being finalised, and most countries haven’t started incorporating the changes into national laws yet.
- ESMA’s call for comments on private credit ratings closed at the end of May, so it is now reviewing responses and will assess whether any regulatory action is needed.
- The call for input by the Financial Conduct Authority (FCA) in the UK on the future regulation of alternative fund managers closed on 9 June and the regulator will consult on detail rules.
- The FCA is also consulting on the final rules on easing the professional client threshold with final rules expected in the second half of the year.
