S&P Global Ratings, a global provider of credit ratings, research and risk analytics, reports that expanding private markets are creating closer ties between banks, insurance companies and alternative asset managers across Europe, increasing interconnectedness within the financial system.
In a report released on June 11, 2026, Private market linkages strengthen interconnections among European financial institutions, S&P Global Ratings said direct risks to private debt from European banks and insurance companies continued to rise. However, the firm believes these exposures remain relatively small compared to the overall size of the institution’s balance sheet.
S&P Global Ratings said rapid growth in Europe’s private markets has narrowed the gap with North America, where private capital markets have traditionally been larger and less reliant on bank financing. The firm estimates that Europe-focused private equity funds currently manage about $2.3 trillion in assets, including about $1.8 trillion in private equity and $500 billion in private debt.
Discussing developments in the sector, Andrey Nikolaev, credit analyst at S&P Global Ratings, commented: “European private credit funds are gradually expanding their lending activities from mid-market entities to more credit categories, while strengthening relationships with banks. This heralds a wave of financial disintermediation and creates a private market relationship of interconnected risks and dependencies for European banks, insurance companies and alternative investment managers.”
S&P Global Ratings noted that while transparency in private credit remains limited, available information suggests risks are currently manageable. The firm found that banks’ exposures were concentrated among a relatively small number of major institutions.
It is estimated that the total private credit fund withdrawal exposure of Europe’s seven largest banks is about 108 billion euros, accounting for about 2% of customer loans. These exposures are typically secured, diversified and supported by modest loan-to-value ratios, the report said.
The firm also saw a gradual increase in private credit exposure among European insurers. Insurers’ allocations to private credit will increase from 3.8% in 2019 to 5.8% of total investments in 2025, S&P Global Ratings said, based on regulatory data. Despite the increase, exposure remains below that of North American life insurers, which have private placement or rated debt accounting for about 6% of investments.
When considering the potential impact of weakness in private credit markets, Nikolaev added: “Current levels of direct risk suggest that the downturn in private credit will have a limited impact on the ratings of Europe’s largest banks and insurance companies.”
S&P Global Ratings said that while direct risks remain limited, the broader network of relationships developing within private markets warrants attention. The company highlighted that some banks are now partnering with private finance companies to originate and distribute loans, creating more connections between traditional financial institutions and alternative investment managers.
S&P Global Ratings also warned that limited disclosure standards in private markets could amplify risks during periods of market stress. The company said factors such as limited public reporting, less transparent pricing and a lack of public credit ratings could make it more difficult for market participants to assess risk and could increase the likelihood of contagion.
S&P Global Ratings said that as private finance becomes a more important source of funding for investment and economic activity across Europe, stricter disclosure practices and greater transparency will play an increasingly important role in supporting market confidence and oversight.
