BofA sharpens focus on private credit, despite rising fears

• Key insight: Bank of America is putting more focus on private-credit lending as the sector’s needs continue to grow.
• What’s at stake: Banks are getting more entangled with asset managers in the $1.8 trillion private credit market at a time when the tide may be shifting for the business.
• Supporting data: As of the third quarter 2025, banks with more than $100 billion of assets held about 86% of the industry’s loans to nonbank financial institutions, according to a Federal Deposit Insurance Corp. analysis.

Wall Street raised alarm bells on private credit this week, but banks and their regulators haven’t wavered.

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The $1.8 trillion private credit market has boomed in recent years, and traditional lenders have waded deeper into what were once enemy waters. Indeed, lending to nonbank financial institutions has become the fastest-growing loan segment in the banking industry.

Bank of America is the latest of the old-school lenders to jump further into the business. The bank plans to commit $25 billion from its balance sheet to private-credit deals as it seeks to meet the growing needs of the sector.

The $3.4 trillion-asset company’s latest move, first reported by Bloomberg News, marks a sharper focus on the private credit segment.

Bank of America recently tapped new leaders to head up its private-credit strategy, Bloomberg reported.

The megabank’s push comes at a jittery moment for the business.

The stock prices of major asset managers plunged this week, after one such company, Blue Owl Capital, said it would restrict withdrawals from one of its funds, suggesting to investors that there were cracks in its business. The industry had already been taking a beating this month due to fears that artificial intelligence innovations threaten software companies and their private-credit lenders.

The Morningstar U.S. Asset Management index is down nearly 13% over the last month, while the KBW Nasdaq Bank Index is up more than 2%. Bank of America’s stock was largely unaffected by the news of its latest financial commitment to private credit.

On Thursday, Sen. Elizabeth Warren, D-Mass., reiterated her call for bank regulators to pay closer attention to the industry’s exposure to private credit. In a written statement, Warren described Blue Owl as “shadowy.”

“The Trump Administration needs to wake up,” Warren said. “Increase banks’ capital requirements for private credit exposures. Compel transparent data from these firms. And run a stress test on the market now.”

But many experts say one of the main drivers of private credit’s growth was the tighter regulatory environment for banks following the 2008-2009 financial crisis. Banks limited certain lending practices to align with the new rules and guidance, and asset managers jumped in to fill the hole.

Now, though, Trump-era bank regulators have rolled back some standards — like certain restrictions on leveraged lending — that some analysts think could lead to a slowdown in private credit’s growth.

Bank of America CEO Brian Moynihan said at an industry conference in December that the rescission of the leveraged loan guidance could allow his bank to “compete in the market” against private credit. His comments underscore the “frenemy” dynamic between traditional banks and their nonbank peers.

Other megabanks are also juicing up their loans to private credit. JPMorganChase said last year that it would allocate $50 billion from its balance sheet to finance those efforts. JPMorgan executives have described that commitment as necessary to meet client demand.

Banks with more than $100 billion of assets held about 86% of total industry loans to nonbank financial institutions, as of the third quarter 2025, according to a Federal Deposit Insurance Corp. analysis released this week. Ten institutions held about 71% of the debt that nonbank lenders owed to banks.

So far, those loans haven’t shown signs of souring, per the FDIC report, despite pockets of turmoil that have weighed on some financial institutions.

As of the third quarter of last year, bank loans to nonbank financial institutions were performing better than loans in categories with similar yield and risk characteristics, such as commercial and industrial loans, according to the FDIC’s research. At larger banks, loans to nonbank financial institutions were even more sound, the FDIC found.

The apparent strength of the loans affirms banks’ confidence that a handful of credit glitches last year were one-off situations, as opposed to signals of what JPMorgan CEO Jamie Dimon said at the time could be a “cockroach” problem.