The global economy could face a “double whammy” if market volatility coincides with mounting risks in private credit, a top financial stability official warned EU lawmakers. Speaking to the European Parliament’s Economic and Monetary Affairs Committee in Brussels, Financial Stability Board chair Andrew Bailey said regulators must consider how overlapping risks could amplify shocks rather than viewing them in isolation.
The warning comes amid turbulent global markets, driven by US policy uncertainty, trade tensions and geopolitical instability, as well as concerns over central bank independence. At the same time, risks are building in the private credit sector, which Bailey described as relatively opaque, with rising defaults raising red flags for investors and regulators alike.
He noted that tighter bank lending rules since the 2008 financial crisis have pushed more risk into non-bank lenders, including hedge funds and asset managers offering highly leveraged loans. Bailey drew parallels with the last financial crisis, warning that a loss of confidence could trigger broader market disruption if problems spread.
However, he stressed that the banking system remains resilient, providing an important buffer, while urging continued vigilance from policymakers to manage emerging risks.
via Euronews
