OFR Quantifies Bank and Insurer Exposure to Private Credit via Form PF Mapping

OFR Quantifies Bank and Insurer Exposure to Private Credit via Form PF Mapping

The Office of Financial Research (OFR) published a landmark study, OFR Brief 26-02, on March 12, 2026, titled "Measuring Counterparty Exposures to Private Credit". Authored by Ted Berg and Jung Hoon Lee, the report utilizes SEC Form PF data to map the systemic linkages connecting banks, insurers, and private credit funds. The study marks the first time U.S. regulators have systematically quantified "back leverage" and LP commitments in the private credit sector, revealing a substantial web of interconnectedness that could act as a transmission channel for financial instability¹ during a prolonged downturn.

Key Quantitative Findings

The OFR's analysis of year-end 2024 data highlights the scale of bank and institutional involvement in funding the private credit boom:

• Total Debt/Back Leverage: The OFR estimates total bank and non-bank lending to U.S. private credit funds at $410 billion to $540 billion. This includes approximately $215 billion in borrowings reported directly on SEC Form PF.
• Uncalled LP Commitments: Beyond drawn debt, private credit funds hold $300 billion in uncalled capital commitments ("dry powder") from their limited partners (LPs).
• Insurance Sector Exposure: U.S. insurers held $110 billion in private credit assets (representing 11% of the $997 billion in total private credit assets identified by the OFR) and had legally binding commitments to provide an additional $90 billion in uncalled capital (accounting for 29% of the total $312 billion in uncalled capital). While these holdings represent only 1.2% of total life, health, and annuity insurer assets ($9.3 trillion in 2024), they are highly concentrated.

The Risk Transmission Channels

The OFR identifies two primary channels through which distress in private credit could infect the broader financial system:

1. Bank Counterparty Leverage (Back Leverage): Global systemically important banks (G-SIBs) provide the vast majority of leverage to private credit funds through subscription lines, warehouse facilities, and asset-backed SPVs. While these bank loans are typically heavily overcollateralized, the underlying portfolio loans serving as collateral are highly opaque. If private credit defaults continue to rise (as detailed in Fitch Reports Record 6.0% Private Credit Default Rate in April 2026 as Distressed Restructurings and "Bad PIK" Squeeze Portfolios), banks may face collateral devaluations, forcing them to curtail credit lines or demand additional collateral.

2. The LP Capital Call Liquidity Squeeze: During a protracted market downturn, private credit sponsors will call on their LPs to supply the $300 billion in committed dry powder. If institutional investors (such as insurance companies or pension funds) face their own liquidity squeezes, they may struggle to meet these capital calls. To fulfill their contractual obligations, these LPs might be forced to liquidate highly liquid public assets, spreading the private credit stress into public equity and bond markets.

Individual Bank Disclosures and Regulatory Gaps

While the OFR has provided a top-down estimate using Form PF, individual bank disclosures cut across multiple non-bank financial institution (NBFI) categories, making clean aggregation difficult. Bank disclosures from Q1 2026 reveal substantial structured financing exposures to non-banks:

• Barclays: $89 billion
• JPMorgan Chase: $50 billion
• Wells Fargo: $36 billion
• Citigroup: $22 billion

Regulators remain concerned that because valuations are determined internally by private credit sponsors rather than public markets, bank risk models may underestimate the true risk of their private credit back-leverage portfolios. This opacity is compounded by the rising use of payment-in-kind (PIK) interest and distressed restructurings that temporarily mask borrower distress (as explored in Distressed Restructurings May Have "Deferred" Private Credit Stress and Distressed Exchange Cohorts Face Hard Default Cliff as Private Credit Defaults Hit 5.8%).