S&P report highlights need for ASIC's oversight as market grows
Regulatory oversight of private credit markets in Australia is expected to strengthen the sector’s stability and transparency, according to a new report from S&P Global Ratings.
The credit rating agency’s analysis indicates that recent findings by the Australian Securities and Investments Commission (ASIC) align with the need for higher standards and more robust oversight as private credit continues to expand.
ASIC’s recent update, “Advancing Australia’s public and private markets: progress update,” released earlier this week, calls for the “consistent adoption of good practices to promote the investor confidence and integrity necessary to sustain a well-functioning private credit market.”
These practices, the regulator said, should involve regular reporting on fund composition and independent loan valuations. Disclosure should clarify whether credit ratings are internal or from third parties, outline the extent of mezzanine debt and equity holdings, and detail all manager fees and earnings, including any interest income. Effective liquidity risk management, clear information on leverage, and transparent fund policies are also essential.
ASIC further emphasises the need for transparency in related-party or inter-fund transactions, supported by independent review, as well as consistency in the use of investment and real estate terminology.
The private credit sector in Australia is expanding rapidly, mirroring trends seen internationally. This growth, while offering new opportunities, also introduces financial risks, particularly if economic conditions deteriorate.
“Australian regulators are looking to get in front of these risks and avoid an outcry if private market investments were to sour, especially if transparency is lacking, and retail investors are prominent,” said Gavin Gunning (pictured top), credit analyst at S&P Global Ratings.
“At the same time, they do not want to stifle the current free flow of capital between investors looking for higher yield and borrowers chasing nonbank funding.”
S&P Global Ratings suggests that enhanced transparency, improved reporting, and stronger oversight could reinforce the resilience of Australia’s private credit market. These measures are expected to help maintain investor confidence through different economic cycles. The sector has not yet experienced a significant downturn, but the report points to the importance of preparing for such scenarios.
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