The Role of Private Debt in the Financial Ecosystem

This paper provides a comprehensive introduction to private debt, examines the key drivers behind its expansion, and frames the discussion around potential risk accumulation in the broader economy. Overall, the development of private debt can be viewed as the emergence of a new technology that facilitated the expansion of the high-yield corporate debt market into the middle market. Throughout its history, the evolution of the high-yield debt and the rise of private debt have been closely intertwined with the growth of private equity. Historically, banks have not had significant exposure to financing buyouts or other highly leveraged transactions, whether in the large-cap or mid-cap segments.