The gloves are off in London's financial district as private credit heavyweights launch a blistering counterattack against their banking counterparts, accusing traditional lenders of peddling "misinformation" about their rapidly expanding industry.
The Battle Lines Are Drawn
In an exclusive series of interviews with City A.M., leading figures from the $1.7 trillion private credit market have broken their silence, pushing back against what they describe as a coordinated campaign of criticism from established banking institutions.
Michael Arougheti, CEO of Ares Management, didn't mince words when he stated: "The banking sector's narrative is fundamentally flawed. They're attempting to portray our industry as risky when in reality, we've demonstrated remarkable resilience through multiple economic cycles."
Superior Lending Models or Risky Business?
The core of the dispute centres around lending practices. Private credit leaders argue their direct lending model offers distinct advantages:
- Longer-term investment horizons allowing for more strategic decision-making
- Greater flexibility in deal structuring and borrower relationships
- Reduced regulatory constraints compared to traditional banks
- More aligned interests between lenders and borrowers
Jon Broughton, a partner at private credit firm 17Capital, emphasised: "We're not the shadowy, unregulated entities banks would have you believe. Our due diligence processes are often more rigorous, and our default rates tell a compelling story of stability."
Banking Sector Pushes Back
Traditional financial institutions haven't remained silent. Banking executives have repeatedly warned about the potential systemic risks posed by the private credit boom, particularly concerns around:
- Transparency and valuation methodologies
- Leverage levels within private credit funds
- Liquidity challenges during economic downturns
- Regulatory arbitrage advantages
The tension reflects a fundamental power shift in global finance, with private credit capturing market share that once belonged exclusively to bank syndicated loans.
London's Financial Future at Stake
As the war of words intensifies, the implications for London's position as a global financial hub are significant. Both sectors are competing for the same pool of institutional capital and top talent, with private credit firms increasingly becoming the destination of choice for ambitious financiers.
One senior private credit executive, who requested anonymity, concluded: "The banks are fighting a rearguard action against inevitable change. Their business model is being disrupted, and their criticisms reflect that discomfort rather than any genuine concerns about market stability."
With trillions of dollars in assets at stake and the fundamental structure of corporate lending in flux, this financial cold war shows no signs of cooling anytime soon.
