HSBC Holdings plc (NYSE:HSBC) is pulling back from some riskier private credit lending after a wave of high-profile bankruptcies intensified scrutiny of underwriting practices and loss assumptions.
The bank reportedly informed customers that certain higher-risk private credit loans will not be extended. The decision follows a run of prominent bankruptcies that have put deal vetting and loss assumptions under scrutiny.
An HSBC spokesperson told Reuters that the firm’s offerings cover “every stage of the private credit market… with robust central oversight.”
HSBC’s private credit business has come under increased scrutiny. The bank recently recorded a $400 million loss tied to a loan extended to Apollo’s Atlas SP Partners unit, which financed U.K. mortgage lender Market Financial Solutions before it entered bankruptcy proceedings amid fraud allegations.
Weeks later, HSBC disclosed it had yet to deploy nearly $4 billion of dry powder across its asset management private credit funds, despite announcing plans in 2025 to expand its presence in the sector. A bank spokesperson told Bloomberg the firm remains “committed to the asset managers offering in private credit funds.”
Private Credit Concerns
The broader private credit market has also faced mounting pressure, as investors redeem capital over concerns about weakening underwriting standards and the potential impact of AI-driven disruption on software borrowers that rely on direct lenders. Those outflows have fueled broader concerns over liquidity and asset valuations across the sector.
So far in Q2, Apollo Global Management (NYSE:APO) has limited withdrawal requests from its non-traded private credit fund, Apollo Debt Solutions, after investors asked to withdraw 16.8% of their shares.
The flagship private credit fund of Cliffwater LLC capped redemptions at 5% in the second quarter after investors sought to redeem approximately 17% of the fund’s shares.
Meanwhile, Partners Group is restricting investor withdrawals from its $8.6 billion Global Value SICAV fund after redemption requests exceeded 5% of the net asset value, a move that rattled sentiment across private markets.
Photo by TungCheung via Shutterstock
Login to comment