The LMA has responded to the House of Lords Financial Services Regulation Committee inquiry into the growth of private markets. Our response draws on the experience of our membership, which spans banks, non-bank lenders, institutional investors, borrowers and law firms active across the syndicated and private credit markets.
Private credit as part of a broader ecosystem
Private credit has grown significantly over the past decade, and much of the public debate frames it as an alternative to bank lending. Our members' experience is more nuanced. Banks and private credit providers increasingly work alongside one another: banks provide back-leverage, subscription and NAV facilities to private credit funds, partner with them on origination and hold positions in the same capital structures.
We encouraged the Committee to view private credit as one part of an interconnected loan market that gives borrowers, particularly mid-market companies, access to flexible, long-term financing that supports investment and growth in the UK economy.
Transparency and data
Questions about the transparency of private markets are understandable. Private credit transactions are, by their nature, bilateral or held by small lender groups, and are not publicly traded. We noted that the absence of public pricing should not be confused with an absence of oversight. Lenders conduct detailed due diligence, transactions are documented on well-understood terms and fund managers are subject to regulation and investor reporting.
We nonetheless support efforts to improve the quality and consistency of data available to regulators, provided any new reporting is proportionate, builds on existing regimes and avoids duplication.
The absence of public pricing should not be confused with an absence of oversight.
Interconnectedness and resilience
The links between banks and private credit funds are an important area for supervisors to understand. We highlighted that these exposures are typically senior, secured and subject to banks' existing risk management and capital frameworks. Stress testing exercises, such as the Bank of England's system-wide exploratory scenario work on non-bank financial institutions, are a valuable way to build a shared picture of how the system behaves under pressure.
The role of standard documentation
Consistent documentation supports both market efficiency and financial stability. Recognised documentary standards make terms easier to understand, compare and trade, reduce execution risk and support orderly outcomes when borrowers face difficulty. The LMA's documentation is used across both bank and private credit transactions, and we continue to develop it with input from all parts of the market.
Our recommendations
- Recognise the contribution private credit makes to UK growth and to the competitiveness of London as a financial centre.
- Take a proportionate, activity-based approach to any new regulatory measures, building on existing frameworks.
- Prioritise better data and supervisory understanding over new rules where risks are not yet clearly evidenced.
- Continue to engage with industry bodies to ensure policy reflects how the market works in practice.
We are grateful to the members who contributed to our response and look forward to continuing our engagement with the Committee and with UK authorities. Members can read the full response in our public policy and regulation section.
