ESMA warns US private credit risks could hit European investors

The European Securities and Markets Authority has flagged growing risks in the US private credit market that could spill over to European investors, adding regulatory weight to mounting concerns about the $1.7 trillion asset class.

In its second risk monitoring report of 2026, published on September 10, ESMA said recent problems in US private credit could affect EU investment as redemption requests from semi-liquid funds rise. The regulator noted that risks "warrant close monitoring in less transparent and increasingly interconnected segments, both in private credit exposures to the US market" and in links between crypto-asset markets and the broader financial system.ipe+1

Record Defaults Deepen Concern

The warning arrives as US private credit defaults climb to fresh highs. The trailing 12-month default rate across roughly 1,300 borrowers tracked by Fitch Ratings rose to a record 6.3% through August, up from 6.1% the prior month, with the highest monthly total of default events in the past year. CNBC parent Comcast reported the data Monday, with correspondent Robert Frank detailing the trend.cnbc+2

Blackstone ↘ 0.36% President Jon Gray pushed back against the growing pessimism. In an interview with Swiss newspaper NZZ published Monday, Gray said the firm is working through a backlog of redemption requests at its flagship private credit fund but remains confident in the asset class. "Over time, investor confidence will be rebuilt, and the inflows will return," Gray said. "There's a lot of noise, a lot of critics; the town criers are proclaiming a global crisis — and then nothing happens".bloomberg+1

Earlier this month, Blackstone kept its quarterly withdrawal cap at 5% after investors again sought to redeem more shares than the fund was willing to pay back.benzinga

AI Infrastructure Adds a New Layer of Risk

Separately, Fortress Investment Group co-CEO Jack Neumark warned private credit lenders against chasing AI-related deals at the Milken Institute's Canada Investment Summit on Monday. "If we go into big data center opportunities or big GPU opportunities or other technology-focused investments, as a credit investor, you're not getting paid for that upside, and you're stuck in the investment if it goes sideways," Neumark said, according to Bloomberg.benzinga

Firms including KKR ↗ 0.63%, Brookfield Asset Management ↗ 1.41%, and Blue Owl Capital ↘ 1.20% have committed billions to data centers and digital infrastructure, but rapid advances in hardware are raising questions about how long these assets will hold their value.benzinga

ESMA Chair Verena Ross underscored the broader fragility. "The wider this gap becomes between deteriorating macro-financial conditions and upbeat market valuation, the greater the risk of an abrupt market correction," she said.esma.europa