Private Credit Reshaping Traditional Banking Model, Says Huw Van Steenis

In Brief: Huw van Steenis, vice chair at Oliver Wyman, discussed with Bloomberg Surveillance hosts how private credit is transforming traditional banking relationships and creating new market dynamics.

Big Picture Drivers:

• Partnership: Banks increasingly accepting partnership models with private credit firms

• Risk Distribution: Senior risks staying with banks while junior risks move to private credit

• Insurance Money: Over half of private credit inflows now coming from insurance companies

Key Topics Covered:

• Market Share: Private credit currently holds about 5-6% of asset-backed lending

• Risk Allocation: Private credit taking higher-yielding leverage finance and mid-market positions

• Investment Grade Push: Private credit firms pursuing investment-grade assets to attract insurance money

By The Numbers:

• Insurance Flow: Over 50% of private credit inflows in past year came from insurers

• Target Assets: 43% of private credit assets need to be investment grade to meet insurer requirements

• Market Share: Private credit controls ~5-6% of asset-backed lending market

Key Players:

• Huw van Steenis: Former Morgan Stanley banking analyst providing perspective on market evolution

• Insurance Companies: Emerging as major funders of private credit strategies

• Traditional Banks: Adapting to new competitive landscape

Memorable Quotes:

• "There's a tranching or reslicing of the banking system - the senior risk is being taken by the banks and the junior risk is being sold"

• "Private credit is the Ozempic to the banking industry - it's helping them shed weight"

The Wrap: Van Steenis describes a fundamental shift in financial markets where private credit is creating a more stratified lending system. While banks retain senior, investment-grade exposures, private credit is absorbing riskier assets - but with insurance companies' growing involvement, the industry is increasingly pursuing higher-quality assets that could put them in direct competition with traditional banks.