Banks’ Hidden Ties to Private Credit Are About to Be Tested
Regional banks’ increased ties to private lending could expose the vulnerability of the broader financial system.
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A budding credit pullback in private markets creates vulnerabilities for regional banks which have increasingly partnered with private lenders as an avenue for retaining relationships with middle market clients.
A legal battle between regional lender Western Alliance Bancorp and Jefferies Financial Group over loans tied to bankrupt auto-parts company First Brands shows how deeply involved some banks have become in private markets. Bloomberg Intelligence put it this way last May: