APRA says Australian private credit risks ‘contained’

Mike Taylor

Managing Editor and Publisher

21 May 2026

The Australian Prudential Regulation Authority (APRA) believes the risks from private credit have been contained in Australia because of the sector’s relatively small size.

The regulator has used its latest System Risk Outlook to point to Australia’s position on private credit but to also note that issues are growing internationally and that there is the potential for spillover to Australia.

It said domestic private credit is estimated to be around $200 billion, or about 3 per cent of the size of the Australian banking system.

“Private credit remains relatively small in Australia, despite rapid growth over the past decade. This small size helps to contain immediate system-wide risks,” APRA said.

“Risks and vulnerabilities from private credit are growing internationally, where opaque structures, infrequent valuations and defaults have prompted heightened global regulatory scrutiny.

“Australian institutions are exposed to offshore developments in private markets through multiple channels, creating potential spillover risks that warrant close monitoring.

“For example, around half of superannuation funds’ private market exposures are international, and banks have increased their appetite for international funds finance products, a form of specialised lending,” the regulator said.

The APRA outlook said the regulator is seeing that the industries it regulates have diverse exposures to private markets, both domestically and overseas.

“Developments in private markets globally could spill over to Australia through regulated entities’ exposures to international asset markets and funding arrangements.

“About 16 per cent of investments by APRA-regulated superannuation funds are in private market assets, and around half of this exposure is offshore,” APRA said. “The insurance industry has smaller investment exposures, at around 4 per cent of total assets, but these exposures are increasing as insurers seek higher returns and greater diversification.

“Banks’ exposures are more indirect, reflecting their role in providing financing rather than investing directly. APRA has observed a recent increase in banks’ appetite for, and exposure to, international funds finance products, which are used to provide debt and other financial support to private investment funds,” it said.