US private credit market turbulence sends BDC shares plunging in 2025
The private credit market in the US has faced growing turbulence since mid-2025. Share prices for major business development companies (BDCs) have fallen sharply, wiping out roughly a quarter of market value for firms like Blue Owl Capital and Ares Capital. This downturn comes as lending from banks to non-bank financial institutions has surged in recent years. Private credit involves non-bank lending to corporate borrowers, typically arranged by BDCs and similar firms. These institutions raise funds from institutional investors and wealthy backers, then relend at higher interest rates to companies considered too risky for traditional banks. However, no single definition exists for private credit, leading to differing interpretations across the financial sector.
Bank lending to non-bank financial institutions—often called 'shadow banks'—has risen dramatically. In 2015, US-licensed banks held $218 billion in loans to these firms. By February 2026, that figure had jumped to $1.38 trillion. Overall, loans from all banks to non-bank lenders grew from $325 billion to $1.87 trillion in the same period.
Major investment banks play a significant role in this expansion. JPMorgan alone is estimated to account for 18% of all lending by non-depository financial institutions (NDFIs). These entities operate with less regulatory oversight than traditional banks, fuelling the rapid growth in private lending. The sharp decline in BDC share prices reflects broader concerns about the stability of private credit markets. With bank loans to shadow lenders reaching record levels, the sector's reliance on high-risk corporate borrowing remains under scrutiny. The ongoing volatility suggests potential challenges ahead for both lenders and investors.
