Bank of Canada Watches $500 Billion in Private Credit Risks

The Bank of Canada is monitoring the growth of private credit in Canada, which has reached $500 billion in value as of this year. This alternative credit model involves businesses taking out loans from non-bank lenders such as asset managers, insurers, and pension funds.

While the share of Canadian businesses using private credit remains limited, its adoption worldwide is increasing rapidly. The Bank of Canada's 2026 financial stability report flagged private credit as a risk, and economists at the central bank have released a paper tracking its growth in Canada.

The report notes that most private lending activity occurs in the United States, with Canadian investors and banks exposed to half a trillion dollars of loans. The Bank of Canada's analysis found that insurers and pension funds are stable investors in private credit, but domestic asset managers are a 'small but growing' segment of the market.

Monetary policymakers consider private credit risks 'manageable,' but think it's still a space worth watching due to its potential for contagion. Peter MacKenzie, senior policy analyst at the C.D. Howe Institute, noted that private lenders stepped in after the 2008-09 financial crisis to fill the gap left by big banks.