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Update: original comment should be. 300B/1.2T*(10% of bank funds) = 2.5%. If I'm reading comment correct. Also I believe the whole private credit ecosyst
by boringg 7mo ago
Update: original comment should be. 300B/1.2T*(10% of bank funds) = 2.5%. If I'm reading comment correct. Also I believe the whole private credit ecosystem is about 1T.
In a catastrophic scenario: if the whole asset class went to 0 (on the banks asset sheet they would lose 2.5% - absorbable pain assuming its not leveraged through creative financial mechanisms).
I would wager that risk is more concentrated on certain institutions instead of across the board so acute pain likely.
- bagacrap 7mo agoThat's only loans to non bank financial institutions. Total bank balance sheets are about $25T.
- overtone1000 7mo agoAnd then that 25% is 10% of US banks' entire lending portfolio, so private credit is about 2.5% of their entire portfolio.
- karambahh 7mo agoI've been told by the head of compliance of the largest European banking group that 2.5% is exactly the threshold at which they begin to be very worried/ at systemic risk Apparently they operate on very low level of tolerable risk (way lower than I thought)
- AnishLaddha 7mo ago>2.5% is likely still survivable, but i think risk departments + regulators are all a lot less risk tolerant after seeing how quickly things went south in 2008 and worries about an out of control spiral