Senator Elizabeth Warren, Ranking Member of the U.S. Senate Committee on Banking, Housing and Urban Affairs, published letters urging the Financial Stability Oversight Council (FSOC) to design and conduct a stress test focused on nonbank financial institutions’ private credit exposures and seeking information from credit rating agencies following reports of inflated ratings for private credit products. The letters point to a USD 1.7 trillion private credit market and cite a 145% increase in the volume of bank loans to private debt funds. Warren referenced FSOC’s 2024 annual report discussion of potential risks in private credit, including opacity, credit risk, liquidity risk, and growing interconnectedness with banks, insurance companies, and other institutions, and urged FSOC to work with the Office of Financial Research to run an exploratory stress test aligned with exercises conducted by international regulators. Separate letters asked S&P Global Ratings, Moody’s Investors Service, Fitch Ratings, Morningstar DBRS, A.M. Best, Demotech, KBRA, and Egan-Jones to explain business practices, management of conflicts of interest, and rating methodologies for private credit products.
U.S. Senate Committee on Banking, Housing and Urban Affairs 2025-07-17
U.S. Senate Committee on Banking, Housing and Urban Affairs ranking member urges FSOC to stress test private credit and questions rating agencies on product ratings
Senator Elizabeth Warren urged the Financial Stability Oversight Council (FSOC) to conduct a stress test on nonbank financial institutions' private credit exposures, highlighting risks such as opacity and liquidity in the USD 1.7 trillion private credit market. She also requested credit rating agencies to clarify their business practices and rating methodologies for private credit products.