FINANCE WATCHDOG WARNS PRIVATE CREDIT FUELING AI BUBBLE

The global finance watchdog, which oversees central banks and financial authorities in 24 countries, released a report identifying tech, healthcare, and services sectors as the largest private credit borrowers. Private credit—loans from non-bank lenders—has surged as a funding source for AI development and expansion. The FSB warns this concentration of lending in capital-intensive AI ventures creates vulnerability to market downturns. The report highlights that if AI investments fail to deliver expected returns or face regulatory headwinds, the resulting correction could expose private credit funds to significant losses. This could ripple through financial markets given the sector's growing role in corporate financing. The FSB recommends closer monitoring of private credit growth and stronger disclosure requirements. It also calls for improved risk management standards among lenders. Private credit has grown rapidly as traditional bank lending tightened following recent monetary policy shifts. The sector now represents a material component of global corporate financing.