Business
Private-Credit Risks Look Manageable, Says ECB
That’s almost as big as America’s subprime-mortgage market in 2006, just before it took down the world economy. The difference, the ECB said: Private credit represents 4.7% of U.S. GDP today, whereas $1.5 trillion in subprime mortgages represented nearly 11% of the economy back then.
The ECB, which looks after financial stability in the eurozone, said banks in the single-currency area have much less exposure to private credit than they did to U.S. subprime mortgages before the global financial crisis. That could change if private credit balloons as a source of funding for the artificial-intelligence industry, it said.
European insurers stand to lose much more than banks in a private-credit downturn, the ECB found, mostly from associated losses in public markets.
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