The European private credit market is poised for significant growth and could begin to rival the US, according to a report by Bloomberg citing the findings a new report from Moody’s Ratings, the bond credit rating business of Moody’s Corporation.
Historically, Europe’s private credit sector has lagged behind the US due to regulatory and legal constraints, limiting the ability of lenders to expand. However, Moody’s highlights several factors set to drive growth, including untapped market potential, regulatory reforms, and the push for financial autonomy amid deglobalisation.
The report notes that reforms aimed at unlocking insurer capital for private credit, easing securitisation, and lowering capital charges could further accelerate the sector’s development. At the same time, private credit lending is becoming increasingly concentrated, with six of the largest firms now accounting for 59% of all fundraising, up from 20% in 2019.
European private credit funds are also diversifying their offerings to meet borrower needs, including payment-in-kind (PIK) loans, net asset value financing, and bespoke credit structures. These innovations are positioning the market to support sectors that have traditionally been overlooked, such as defense and infrastructure, especially given rising geopolitical pressures and budget gaps.
Firms such as Apollo Global Management are already looking at investing in areas like artificial intelligence, defence, and infrastructure across Europe, reflecting the sector’s broadening focus.
