Following the bankruptcies of subprime auto lender Tricolor and auto-parts supplier First Brands Group, which rattled the credit markets, a Moody’s report has sounded the alarm over U.S. banks’ high exposure to private equity and private credit.
U.S. banks’ exposure to private equity has reached $300 billion, Moody’s Investors Service revealed in an Oct. 21 report.
The credit agency said that the increasing interdependence between banks and private credit firms poses unique challenges, since the two are both partners and competitors in the lending market.
“As banks compete with non-bank lenders and simultaneously finance them, asset quality challenges may surface,” Moody’s said in the report….