Warren Calls for Stress Test on Private Credit, Presses Ratings Agencies on Inflated Private Credit Ratings
FOR IMMEDIATE RELEASE
July 17, 2025
Contact: Timothy White (Banking)
Warren Calls for Stress Test on Private Credit, Presses Ratings Agencies on Inflated Private Credit Ratings
“The growth [of private credit] could have significant implications for the stability of the financial system and health of the broader economy”
Read letter to Bessent here | Read letter to credit ratings agencies here
Washington, D.C. – Today, U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, wrote to Treasury Secretary Scott Bessent, the Chair of the Financial Stability Oversight Council (FSOC), outlining her concerns with financial stability risks posed by the growing private credit market and calling for FSOC to design and conduct a stress test focused on nonbank financial institutions’ private credit exposures. To further examine the safety and soundness implications of private credit, Ranking Member Warren sent a series of letters to credit ratings agencies seeking answers on their business models after public reporting that some agencies have provided inflated ratings for private credit products.
“The $1.7 trillion private credit market has grown rapidly in recent years, including a 145% increase in the volume of bank loans to private debt funds … In its 2024 annual report, FSOC also acknowledged the ‘potential financial stability risks’ inherent in the private credit market, including ‘opacity, credit risk, liquidity risk, and increasing interconnectedness with banks, insurance companies, and other institutions,’” wrote Ranking Member Warren in her letter to Secretary Bessent.
Ranking Member Warren continued: “I also urge FSOC to work with the Office of Financial Research (“OFR”) to design and conduct an exploratory stress test of nonbank financial institutions engaged in private credit activities, in alignment with recent exercises conducted by international financial regulators.”
In her letters to credit ratings agencies, Ranking Member Warren wrote “recent reporting suggests that some companies may be inflating the credit ratings of private credit products, posing potential systemic risks to the financial system. To help us as policymakers better understand the health of the private credit market, we seek details on your company’s business practices—especially as it relates to managing potential conflicts of interest in the development of credit ratings—and your methodology for determining product ratings.”
Ranking Member Warren sent letters to the following ratings agencies: S&P Global Ratings, Moody’s Investors Service, Fitch Ratings, Morningstar DBRS, A.M. Best, Demotech, KBRA, and Egan-Jones.
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