S&P Global Ratings, the global credit ratings, research and risk analysis provider, has reported that expanding private markets are creating closer links between banks, insurers and alternative asset managers across Europe, increasing interconnectedness within the financial system.
In a report published on the 11th of June 2026, Private Market Nexus Increases Interconnectedness Among European Financial Institutions, S&P Global Ratings said direct exposure to private debt among European banks and insurance companies is continuing to rise. However, the company believes these exposures remain relatively modest when compared with the overall size of institutions’ balance sheets.
According to S&P Global Ratings, the rapid growth of European private markets has narrowed the gap with North America, where private capital markets have traditionally been larger and less dependent on bank funding. The company estimates that private funds focused on Europe now oversee around $2.3 trillion in assets, comprising approximately $1.8 trillion in private equity and $500 billion in private debt.
Discussing developments within the sector, S&P Global Ratings credit analyst Andrey Nikolaev, commented: “European private credit funds are gradually expanding their lending activities from mid-market entities to more credit classes, while strengthening their relationships with banks. This indicates a wave of financial disintermediation and creates a private market nexus of interconnected risks and dependencies for European banks, insurance companies, and alternative investment managers.”
S&P Global Ratings noted that although transparency around private credit remains limited, available information suggests risks are currently manageable. The company found that exposure among banks is concentrated within a relatively small group of major institutions.
It estimates that drawn exposure to private credit funds among Europe’s seven largest banks totals approximately €108 billion, representing around 2% of customer lending. These exposures are generally secured, diversified and supported by moderate loan-to-value ratios, according to the report.
The company also identified a gradual increase in private credit exposure among European insurers. Drawing on regulatory data, S&P Global Ratings said insurers’ allocations to private credit rose to 5.8% of total investments in 2025, up from 3.8% in 2019. Despite this increase, exposure remains below that of North American life insurers, where privately placed or rated debt accounts for around 6% of investments.
Reflecting on the potential impact of weaker private credit markets, Nikolaev added: “Current direct exposure levels suggest that a private credit downturn would have a limited effect on the ratings on large European banks and insurers.”
While direct exposures remain limited, S&P Global Ratings said the broader network of relationships developing within private markets warrants attention. The company highlighted that some banks are now working alongside private finance firms to originate and distribute loans, creating additional links between traditional financial institutions and alternative investment managers.
S&P Global Ratings also warned that limited disclosure standards across private markets could amplify risks during periods of market stress. The company said factors such as restricted public reporting, less transparent pricing and the absence of public credit ratings may make it more difficult for market participants to assess risks and could increase the potential for contagion.
As private finance becomes a more significant source of funding for investment and economic activity across Europe, S&P Global Ratings said stronger disclosure practices and greater transparency will play an increasingly important role in supporting market confidence and oversight.
