Private Credit Woes Should Put Banks on Notice: Editorial

How worried should the US be about private credit? Already this year, more than 1 in 10 private credit borrowers are deferring cash interest payments and at least 45 firms have been taken over by their lenders, the most in six years. Pools of private credit loans managed by BlackRock Inc. and Blue Owl Capital Inc. are showing signs of distress.

The essential question is whether banks are sufficiently insulated from these risks.

The last credit crisis swamped many of the biggest banks, forcing them to reinforce their balance sheets. As they scaled back lending, fund managers saw a chance ...