US and Europe clash over private credit market risks

European financial supervisors seeking a clearer picture of banks' exposure to private credit markets are running into resistance from the U.S. Treasury, highlighting a widening transatlantic divide ​over financial regulation, officials saA'we7uw4846275546t44y5yt4utyy4tyy.

European authorities are increasingly concerned about the global private-credit industry estimated at around $2 trillion, with much of it concentrated in the United ‌States, and its limited disclosure, opaque valuations and complex funding structures.

Recent market strains, including redemption restrictions at some funds and a series of high-profile corporate defaults, have heightened concerns about hidden risks spreading through the financial system.

European regulators have been pressing for more information on the underlying assets to which financial institutions they oversee are exposed, including details on borrowers, valuation methods and guarantees backing investments.

But U.S. Treasury officials have resisted broader data-sharing, ​arguing that information is confidential and that additional disclosure requirements would impose unnecessary burdens on firms, several sources said.

"We feel some resistance from some supervisors around ​the world," Bundesbank board member Michael Theurer told Reuters.

"There are arguments that they are not allowed to share — they have legal restrictions. ⁠And then there is the general criticism that these are new reporting requirements, a new bureaucratic burden."

The discussions between U.S. and European supervisors have taken place in international ​forums including the Financial Stability Board, other officials said, declining to be named because FSB deliberations are confidential.

An FSB spokesperson said patchy data and differing definitions make private-credit risks hard ​to compare across countries, underscoring the need for greater disclosure and common reporting standards.

Some European officials have warned that without more information regulators may be forced to impose stricter capital requirements on the banks they oversee to cover potential losses.

Spokespeople for the Federal Reserve and the U.S. Treasury Department declined comment.

A spokesperson for the U.S. Securities and Exchange Commission, which represents the United States on the FSB along ​with the Fed and Treasury, said the SEC participates in such forums but takes the confidentiality and legal restrictions to sharing certain information seriously.

The dispute is part of ​a broader divide across the Atlantic on a range of matters including international security, climate change, trade, market regulation and technology.

-Reuters