Australian regulator’s private credit scrutiny supports market stability: analyst

Better transparency, reporting, and oversight will strengthen the market.

Australian regulators’ increased scrutiny of private capital markets globally is a positive development, in S&P Global Ratings’ view.

The regulator's findings support "opportunities for improvement" in the Australian private credit funds sector. ASIC advocates for a "consistent adoption of good practices to promote the investor confidence and integrity necessary to sustain a well-functioning private credit market.”

Private credit is growing rapidly, and such fast growth inevitably brings with it financial risks for investors in the event of financial shocks or economic downturns, S&P warned.

"Australian regulators are looking to get in front of these risks and avoid an outcry if private market investments were to sour, especially if transparency is lacking, and retail investors are prominent," said Gavin Gunning, a credit analyst at S&P Global Ratings.

Better transparency, reporting, and oversight will strengthen the Australian private credit market, Gunning said.

“This is likely to contribute to more robust and enduring investor confidence during economic cycles and industry downturns. A major downturn has yet to test the Australian private credit sector,” S&P said in its report.