Lenders outside the banking system play a meaningful role in business finance, but the RBA's October Financial Stability Review judges their risks to be "contained by their relatively small size".

Not every loan in Australia comes from a bank. Non-bank lenders and private credit funds also provide finance to households and businesses, and they attract periodic questions about whether they could become a weak point in the financial system.

The RBA's October 2026 Financial Stability Review (FSR) addresses that question directly. Its answer, in short, is that non-banks matter, particularly for business lending, but that they are still small relative to the system as a whole. That is the reason the central bank gives for describing the risks they pose as contained. Three numbers from the review frame the discussion: around 6 per cent of financial system assets, around 10 per cent of business debt, and an upper limit of 2.8 per cent of bank assets for banks' drawn exposures to private credit.

Who the non-banks are

In general terms, non-bank lenders are financial institutions that provide credit without holding a banking licence. Unlike banks, they generally do not fund themselves through customer deposits, relying instead on sources such as investor capital, securitisation or wholesale borrowing. That distinction matters for financial stability: if a non-bank runs into trouble, there are no deposits at stake in the way there would be with a bank.

Private credit is a related but distinct category. It broadly refers to loans made by investment funds and other non-bank investors directly to businesses, rather than through banks or public bond markets. The two categories can overlap.

Size as the safeguard

The FSR puts the scale of non-bank lenders at around 6 per cent of financial system assets. The media release accompanying the review, published on 1 October 2026, stated that the risks from non-banks are "contained by their relatively small size".

For comparison, superannuation funds account for around one-third of financial system assets, according to the same review. Set against that, a sector holding around 6 per cent of assets is a comparatively small part of the system, which is the basis for the RBA's view that its risks are contained.

Private credit is smaller again when measured against the whole system. The FSR estimates it at less than 2 per cent of financial system assets.

A bigger slice of business lending

The picture looks different when the focus shifts from total assets to business debt. Here, lenders outside the banking system are more prominent:

  • Non-banks: around 10 per cent of total business debt, according to the FSR's Financial Stability Assessment.
  • Private credit: around 10 per cent of total business debt, on the largest available estimate.
  • Banks' exposure to private credit: an upper limit of 2.8 per cent of bank assets for drawn exposures.

These figures come from different parts of the review and may overlap, so they should not be added together. What they show is that non-bank and private lenders are a meaningful source of finance for businesses, even while their footprint in the overall financial system is modest.

The banks' link to private credit is worth noting. Because banks have some exposure to private credit, problems in that sector could in principle feed back to them. The 2.8 per cent figure is an upper limit on banks' drawn exposures, which puts the size of that link in perspective.

The FSR also looked at recent stress in the sector. It described private credit defaults in late 2025 and early 2026 as largely idiosyncratic, meaning they reflected the circumstances of particular borrowers or lenders rather than a common, system-wide cause.

Resilience, with caveats

The FSR's overall conclusion is that "The Australian financial system has a good degree of resilience". Banks, which remain the core of the system, had a CET1 capital ratio of 12.4 per cent in June 2026. Under a severe stress scenario, with unemployment rising to 6.3 per cent, the cash rate rising to 5.6 per cent, housing and commercial property prices falling 20 per cent and a severe GDP contraction, that ratio was "estimated to decline to around 11.6 per cent".

Banks' provisions stood at "around 0.7 per cent of total credit outstanding", and as of June 2026 over 90 per cent of housing non-performing loans and over 50 per cent of business non-performing loans were well secured.

Business credit growth more broadly "remains strong", having been above its post-GFC average for a couple of years. The minutes of the September Monetary Policy Board meeting described it as very strong and broadly based. Business arrears remain low, and while insolvencies are elevated in hospitality, construction and transport, the FSR noted that most insolvent firms are small and have little bank debt.

Contained does not mean ignored. The media release noted that global and operational vulnerabilities are growing, and the FSR's list of global threats includes rising sovereign debt in some large economies, low risk premia, leveraged investors in bond markets, and AI-related expectations and financing as a potential trigger for a sharp repricing. A broad repricing of risk could test lenders of all kinds, including those outside the banking system.

Among its recommendations, the RBA called for lending standards to remain sound, for operational resilience to be maintained, including at critical service providers, and for continued improvement in risk management, scenario analysis and crisis simulations. Those recommendations apply across the system, including to lenders outside the banks.

For borrowers and investors, the FSR is not a verdict on any individual lender or fund. Those considering borrowing from, or investing with, a non-bank or private credit provider may wish to understand how it is funded and regulated, and to seek advice from a licensed professional.

The bottom line

Non-bank lenders account for around 6 per cent of Australia's financial system assets, and private credit for less than 2 per cent, although each represents around a tenth of business debt on the RBA's estimates. The central bank judges their risks to be contained mainly because of their relatively small size, limited bank exposure and the largely idiosyncratic nature of recent private credit defaults, while still urging sound lending standards across the system.