JPMorgan Chase (JPM) recently announced Increase its private credit stake Highlights of the growth trends across the financial sector: Major banks are increasingly working with private credit companies to expand their reach in one of the most dynamic areas of finance. The bank’s $50 billion commitment from its balance sheet reflects its growing confidence in this market, but the $15 billion from co-loan partners highlights a larger shift in deeper collaboration with private credit investors, which are far beyond the edge. The bank's actions follow A $10 billion partnership was established in October last year Use Cliffwater, FS Investments and Shenkman Capital Management. Meanwhile, Wells Fargo's (WFC) partnership with Centerbridge completed a $2.8 billion direct loan transaction within the first year, further verifying the feasibility of the bank-private credit alliance. These partnerships represent a win-win scenario for banks and private credit lenders, explain their growing prevalence and recommend wider adoption besides the largest banks.
The ever-changing financial landscape
It’s nothing new to a bank paired with a private credit lender, but the speed and size of the recently announced transactions show a decisive shift. In the past two years only Citi (with Apollo) and PNC (Combined with TCW)– Major partnerships or specialized platforms for direct loan transactions have been revealed. Even some regional banks, for example Webster Bankhas entered competition, joining forces with asset managers such as Marathon Asset Management to expand their lending capabilities.
These alliances are at a time when private credit interest grows. Since the global financial crisis, increased regulatory pressure has encouraged banks to lower their balance sheets, allowing private credit funds to meet the needs of borrowers whose funds are not available to banks. As a result, private credit is now estimated to represent more than $1.6 trillion in assets under management (AUM), according to Preqin. Much of the growth is attributed to direct lending, a subset of the private credit market where private credit funds lend directly to businesses rather than relying on joint loans. According to leading market analysts, the direct loan market could almost double to $1.4 trillion by the end of 2028, which is subject to bank balance sheets, ongoing restrictions on regulatory capital requirements, and the recognized advantages of direct loans – speed, flexibility and simplicity – more traditional financing options.
For private credit fund managers, working directly with banks can open the door to a wide range of high-quality borrowers. Meanwhile, banks can maintain critical corporate relationships without having to end the balance sheet. These partnerships have evolved from a niche arrangement to a viable strategic leverage for both parties.
Bank's opinion
From a bank's perspective, the appeals to these partnerships are obvious. By leveraging a private credit partner's deep capital base, a bank can alleviate pressures from regulations requiring heightened capital and liquidity buffers—especially relevant for larger institutions and those approaching thresholds for heightened regulatory scrutiny, such as Category II and III banks or those nearing Global Systemically Important Bank (GSIB) status, which applies to the largest, most connected banks Instead of risking losing clients or diluting valuable borrower relationships, banks can turn selected transactions toward a common loan structure and maintain their role as a primary relationship manager while offloading considerable credit risks. This arrangement also keeps the auxiliary income and deposit relationships intact, allowing banks to earn the expenses of initiating, serving or consulting work.
The perspective of private credit companies
For part of it, private credit companies will gain significant advantages by working with established banks. Building a powerful direct launch platform from scratch requires a lot of resources, time and brand awareness. Working with banks, especially with far-reaching corporate client networks, can shorten timelines and speed up capital deployment. Additionally, the bank’s due diligence process and institutional credibility can comfort potential borrowers, making direct loan claims more palatable and efficient. Both parties benefit from combining the bank’s customer relationship and regulatory achievements with the flexible capital of private credit companies and streamlined approval processes.
Beyond the largest bank
While JPMorgan, Wells Fargo, Citigroup and other large institutions dominate the headlines, medium and smaller banks also have great potential for private credit partnerships. But while smaller regional and community banks represent the vast majority of more than 4,000 banks in the U.S., they often face greater limitations such as limited resources, fewer professionals, and less familiarity with private credit structures, which will limit the ability to form complex partnerships with private credit companies.
However, over 30 of these institutions hold over $50 billion in assets, a level that typically provides the client base, infrastructure and institutional knowledge necessary to meaningfully participate in direct lending partnerships, even if they differ from the size of the largest multinationals. Although there is no clear threshold for scale for successful private credit partnerships, banks of this size can often better build effective shared lending platforms. Furthermore, while the Trump administration may shelve any adjustments to the oversight regime for banks with nearly $100 billion in assets, any subsequent new regulatory initiatives in the administration could potentially seek additional impetus for those banks to work with private credit.
Regardless of size, banks sometimes view private credit companies as competitors, especially given the lighter regulatory burden. Mismatched risks Appetite and cultural differences can cause further friction. However, banks browsing these barriers will protect and expand key customer relationships without taking potential credit risks. By carefully building a co-loan agreement, they gained the ability to provide more substantial financing packages, increase fee income and leverage the expertise of private credit partners – to manage risks more effectively.
Challenges and opportunities
No partnership is not affected by complications. For banks, internal compliance and risk management processes must be aligned with private lenders’ more agile business models. This often complex task can slow down the origin of a transaction if not carefully planned. Data sharing, due diligence and transaction approval should be clearly defined so that all parties can understand their responsibilities and responsibilities. Cultural and operational differences can lead to initial inefficiency, but, as JPMorgan and Wells Fargo experiences show, skepticism often decreases once the partnership can deliver results.
Potential policy shifts are also imminent. Strong capital requirements and strict regulatory regimes have prompted banks to seek alternative lending strategies (such as private credit partnerships) to serve borrowers without tightening their balance sheets. But if the Trump administration backs down certain regulations, it can reduce the motivation for banks to seek such partnerships. For example, relax in terms of capital rules or pressure Testing requires that banks may retain more internal loans, at least until another regulatory cycle tightens the rope again.
Looking ahead, the policy pattern is expected to affect the trajectory of bank-private credit cooperation. The Trump administration is expected to relax several capital standards, especially the Basel III “Final Game” regulations, which will be implemented from July 2025 to significantly increase capital requirements for large banks. However, capital requirements are unlikely to return to pre-2008 levels. Future governments may tighten the regulatory environment again, especially if systemic risks or indicators of credit quality are attracting attention. Therefore, the strategic rationale of bank-private credit partnerships may remain strong: they provide banks with a flexible means to meet customer needs without overloading assets and enable private credit managers to deploy capital effectively. If leading institutions continue to prove success, while mid-sized banks follow their leadership, these collaborations could become permanent fixtures for modern corporate financing rather than a brief trend.
