EC invites ESAs to provide technical advice on private credit activities and exposures

The European Commission (EC) has published a letter (dated 21 September) to the European Supervisory Authorities (ESAs), inviting them to deliver technical advice on private credit activities and exposures of EU banks and non-bank financial institutions (NBFIs). The letter enclosed a call for technical advice, which sets out the context for the invitation and notes the recent rapid growth of the private credit sector, the advantages offered by its customisability, the link between private equity and private credit activities, and the link between banks and NBFIs which needs to be better understood.

The EC have scoped the advice to cover the following four areas:

• Lending and investment exposure of EU banks and NBFIs to private credit activities.
• Gaps in the existing reporting framework.
• Retail investor participation.
• Mapping the interconnection between banks and NBFIs.

The advice should consider direct lending and investment in private credit funds or private credit instruments, and the EC has requested that the ESAs focus on unsecured direct lending to private companies and individuals in particular. EU banks and EU NBFIs are in scope, as well as non-EU subsidiaries. The data which should be used for producing this advice should be limited to data from regulatory reporting and/or commercial data sets.

The EC invites the ESAs to set up a task force to discuss and agree the technical specification in the call for advice which relates to common definitions, data management and processing (among other things) with the participation of the other European regulatory authorities. In terms of the expected timetable, the EC invites the report to be delivered within six months from the date of receipt of the call for advice, if possible.

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