News Summary

The Financial Stability Board (FSB) has issued a warning about the significant risks posed by the private credit industry’s role in fueling the artificial intelligence (AI) sector. According to the FSB, AI companies are increasingly relying on private lenders to fund infrastructure such as datacentres, representing over a third of private credit deals in 2025. This dependence raises concerns about potential “sizeable” credit losses should there be a sharp correction in asset valuations. Such a correction could stem from factors like an oversupply of datacentres or significant disruptions in electricity supply, both critical to AI operations. The FSB highlights that private credit borrowers often possess lower credit scores and larger debts compared to those who approach traditional banks. Additionally, the integration of traditional banks into the private credit sector, through partnerships and direct lending, exposes them to potential risks, as evidenced by recent failures of private credit-backed companies like Tricolor and First Brands, which resulted in losses for major banks such as JP Morgan and Barclays.