Bank of Canada Cautiously Eyes Private Credit Industry Growth

The Bank of Canada is keeping an eye on the private credit industry as it continues to grow globally, but remains steady in Canada. According to a recent report from the bank, loans from non-bank organizations to domestic businesses have retained a 15% share over the past decade.

This suggests that private credit has not been displacing traditional sources of funding in Canada, unlike in the US where it is emerging as a viable alternative to bank lending and public debt markets.

The Bank of Canada flagged private credit as a risk in its financial stability report in May, but rated the risks associated with this space as 'manageable'.

Pension funds and life insurers have accumulated significant experience managing the risks that come with private credit, making them well-suited to invest in the space.