Private credit is once again in the spotlight in Australia's lending landscape.
The collapse of New South Wales property developer Bathla Group — which entered voluntary administration last month after accumulating more than $3 billion in debt, much of it owed to private-credit lenders — has brought renewed attention to the sector.
Against this backdrop, Australia and New Zealand Banking Group (ANZ) Chief Executive Officer Nuno Matos said regulators need to examine whether efforts to protect traditional bank depositors are shifting risk into Australia’s less regulated private-credit market.
"When we do regulation, when we do things, we need to take into account the secondary banks," Matos said during the AFR Asia Summit earlier this week. “If you regulate just a part of the system, by definition, the problem will show up in another place, and it might show up in a worse profile.”
But some market players say the warning is misleading.
"I'm surprised actually that a few of the other banks haven't commented similarly, trying to gain some market share back," Jason Arnold, group executive origination at private credit lender Pallas Capital, told Australian Broker. His firm focuses on commercial real estate in Australia's middle market.
Andrew Torrington, co-founder, managing director and chief investment officer at Melbourne-based private credit firm Woodbridge Capital, took a similar view, arguing that the concerns raised aren't a new development.
"I think [Matos] is restating what we've all been saying for years. It's not breaking news," Torrington said. "He's not saying anything we all don't know. Should credit be regulated? Yes. Has ASIC been slow to regulate? Yes. Is Bathla going to blow product markets? No."
Either way, private credit — which includes fewer regulations and direct loans from non-bank institutions to businesses – continues to grow Down Under as traditional banks continue to tighten lending requirements and become increasingly risk averse. And as traditional lenders pull back, alternative lenders have stepped in to fill the gap.
The numbers tell the story.
Globally, the private credit market is expected to exceed $2 trillion USD in 2026, according to Moody's, approaching $4 trillion USD by 2030. Much of the growth stemmed from the Global Financial Crisis, when banks around the world faced increased regulatory scrutiny and began to pull back to manage risk. Since then, the momentum has only increased year-over-year.
Australia is no different. Estimates of the country's private credit assets under management were roughly $200 billion AUD at the end of 2024, up from $188 billion AUD the year before. While still modest in comparison to the global private credit market, the figures indicate continued growth in Australia’s private credit sector.
But with the rapid growth comes greater attention.
Torrington said he's "Not at all concerned by the growth of private credit. I think that's naturally going to continue and none of what's happened with Bathla will stop that one iota. But clearly the lack of regulation around private markets spooks investors and, obviously, brokers and borrowers as well."
Unlike Australia's non-bank sector, private credit firms are not governed by the Australian Securities and Investment Commission (ASIC) giving them greater flexibility in how they lend and invest. Private credit providers can also extend loans worth hundreds of millions of dollars to mid-sized businesses.
Bathla's financial problems only highlighted the discrepancy when its fallout put thousands of homes and projects in limbo, and revealed how exposed the growing private-credit sector is to property developers.
The collapse of Bathla also prompted questions about the sector's growing role in Australia's lending landscape, particularly how well it is regulated. In August, ASIC Chair Sarah Court said Australia's expanding private-credit market was showing its “first significant cracks” following the collapse.
But not everyone in the market shares that view.
"It's certainly a large industry and segment of the market now," Arnold said. "And I think the vast majority of private credit lenders do complete a detailed assessment and look at risks and look at mitigating risk. The vast majority of private credit lenders do significant due diligence to protect their position and their investors.
"It's a significant part of the economy to give borrowers funding options, whether that's on gearing, presales, or pre-commitments," he continued. "Without it we wouldn't be able to provide the housing that we actually need in this country.
"But banks are also a very important part of the funding environment," Pallas added. "They form part of our exit strategies for private credit in many cases. So market share may have certainly decreased [for traditional banks] but there are more transactions in the market as well."
Torrington added: "The reliance on private markets in Australia is increasing year on year; our economy relies on private markets. And in the absence of public markets raising IPOs and listed entities raising money themselves, private markets are filling that void, and non-banks will continue to grow, and [traditional] banking will continue to shrink in terms of what it lends in the market."
