US Regulator Says Eased Bank Rules to Curb Private Credit Demand

The headline refers to a recent move by a top U.S. banking regulator to relax certain rules on leveraged lending so banks can win back business that has flowed to private credit funds, potentially slowing the growth in demand for private credit financing.

What happened

• The Office of the Comptroller of the Currency (OCC) has moved to ease post‑financial‑crisis guidance that constrained banks’ participation in leveraged loans, a type of higher‑risk corporate lending.

• OCC head Jonathan Gould told Senator Elizabeth Warren in a letter that the change will “reduce burden, empower banks, and mitigate the demand that has underpinned the growth of private credit.”

• Regulators previously acknowledged that the older 2013 guidance was “overly restrictive” and contributed to banks losing leveraged‑lending market share to non‑bank private credit funds.

Why it matters for private credit

• Private credit’s rapid expansion has been driven partly by tougher bank rules after 2008, which pushed riskier corporate lending away from regulated banks and toward private funds.

• By loosening leveraged‑loan constraints and other capital or leverage requirements, regulators hope banks can price and hold more of this lending themselves, reducing borrowers’ need to turn to private credit providers.

• Legal and market commentary for 2026 notes that recent easing of bank regulations is expected to increase banks’ appetite to compete directly with private credit lenders, including via bank‑affiliated private credit platforms.​

The broader regulatory backdrop

• The debate sits alongside the “Basel III endgame” and related capital‑rule changes, which in some areas still threaten to push riskier or capital‑intensive exposures out of banks and into private credit; the OCC move is partly a counterweight to that trend.

• Policymakers are trying to balance financial stability (keeping banks well capitalised) with concerns that overly tight bank rules have unintentionally turbocharged lightly regulated private credit markets.

Practical takeaway

• For borrowers, particularly leveraged or mid‑market companies, this could mean more willingness from banks to underwrite or hold loans that might otherwise have gone to private credit funds, potentially improving pricing or terms through competition.

• For investors in private credit, the change is a headwind at the margin: structural demand for private credit remains strong, but a somewhat less constrained banking sector may recapture some deals that were previously defaulting to private credit.