Canadian Private Credit Market Exposures Revealed
The Canadian private credit market has grown significantly, totaling around C$500 billion. However, this figure conceals a significant disparity between banks and other investors. Direct lending by banks accounts for only about 1% of their total lending, with at least C$40 billion in loans.
On the other hand, life insurers and pension funds have much higher exposure to private credit, with combined holdings exceeding C$400 billion. This is more than ten times the minimum disclosed by banks.
The majority of the C$500 billion is held overseas, particularly in the United States, which poses risks of pressure via asset prices, funding mechanisms, and trust. Governor Tiff Macklem emphasized that the issue is not private credit itself but how it will behave under stress.