The RBA's October Financial Stability Review puts private credit at around a tenth of business borrowing but a small slice of the financial system, and finds the risks from non-banks contained for now.

Private credit is one of the non-bank sectors examined in the Reserve Bank of Australia's (RBA) Financial Stability Review (FSR) for October 2026, released on 1 October. The review offers a set of numbers that help put the sector's size in perspective.

The headline comparison is striking. Private credit accounts for around 10 per cent of total business debt in Australia, yet less than 2 per cent of financial system assets. Those two figures describe the same sector from two angles: significant as a source of funding for businesses, small relative to the financial system as a whole.

This explainer works through the key numbers in turn.

The numbers, one by one

1. Around 10 per cent of business debt

The FSR estimates that private credit makes up about one-tenth of total business debt. That makes it a meaningful funding source for companies.

It also sits against a backdrop of rapid business borrowing. The RBA's Financial Aggregates for August 2026, released on 30 September, showed business credit up 0.9 per cent in the month and 10.9 per cent over the year, the fastest of the major credit categories. The Monetary Policy Board's statement on 29 September likewise said business investment and debt growth are strong. The aggregates and the FSR measure different things, however, so these figures should not be combined or compared directly.

2. Less than 2 per cent of financial system assets

Measured against the financial system's total assets, private credit is small: under 2 per cent. That scale is central to the RBA's overall assessment of non-bank risk.

The FSR media release said risks from non-banks are "contained by their relatively small size". Non-banks as a whole account for around 6 per cent of financial system assets.

3. Bank exposures: an upper limit of 2.8 per cent

One way private credit could matter more widely is through its links to banks. The FSR estimated that banks' drawn exposures to private credit funds are, at most, 2.8 per cent of bank assets. That figure is an upper limit: the RBA said actual exposures are likely much smaller.

Bank resilience is therefore part of the private credit story. The FSR reported banks' common equity tier 1 (CET1) capital ratio at 12.4 per cent in June 2026. In the RBA's stress scenario, with housing and commercial property prices falling 20 per cent, unemployment rising to 6.3 per cent and the cash rate rising to 5.6 per cent, the CET1 ratio would fall to around 11.6 per cent, and banks could absorb losses while continuing to extend credit.

4. Some funds have enforced redemption limits

The FSR did flag strain in parts of the sector: some private credit funds have had to enforce redemption limits. Redemption limits restrict how quickly investors can withdraw money from a fund.

The material reviewed for this article does not name the funds involved, quantify how much money was affected or give dates. This article does not speculate on those details.

5. The wider risk picture

The FSR's overall message was that the system shows "a good degree of resilience, but global and operational vulnerabilities continue to mount". The threats it listed included:

  • geopolitical tensions
  • global financial market vulnerabilities
  • advances in artificial intelligence
  • critical service provider disruptions.

On the business side, company insolvencies were described as "around their longer-run average", though elevated in hospitality and construction. Over 50 per cent of business non-performing loans were well secured as at June 2026.

How private credit fits with monetary policy

Private credit is not only a stability question. Business borrowing is part of the demand picture the Board is weighing as it tries to bring inflation down.

The Board raised the cash rate target by 25 basis points to 4.60 per cent on 29 September 2026, the fourth increase of the year. Headline inflation, from the monthly Consumer Price Index, was 4.0 per cent over the year to the August month. Underlying inflation was about 3.5 per cent over the past six months, Governor Michele Bullock said, with the trimmed mean at 3.6 per cent in the June quarter. Both remain above the 2–3 per cent target.

Assistant Governor (Financial Markets) Christopher Kent noted in August that AI investment and higher offshore bond yields could make a given cash rate less restrictive. Bullock, for her part, said on 29 September that "The AI boom is also adding to demand in the Australian economy at a time when we already have capacity pressures." The FSR material reviewed here does not say how much of private credit lending is linked to AI or any other particular sector.

What is and isn't known

Known: private credit is about 10 per cent of business debt and under 2 per cent of system assets; banks' drawn exposures to private credit funds are estimated at no more than 2.8 per cent of bank assets; some funds have enforced redemption limits; the RBA judges non-bank risk to be contained by the sector's relatively small size.

Not known from the material reviewed: the dollar value of private credit outstanding, how fast it is growing, which industries borrow from it, which funds have limited redemptions, and whether the RBA expects the sector's share to change.

The bottom line

Private credit is a significant source of business funding in Australia, accounting for around 10 per cent of total business debt. But it remains small in system terms, at less than 2 per cent of financial system assets, and banks' drawn exposures to private credit funds are at most 2.8 per cent of bank assets and likely much smaller.

The RBA's October FSR judged non-bank risks to be contained by their relatively small size, while noting that some private credit funds have had to enforce redemption limits. Officials will have further opportunities to discuss financial conditions in upcoming appearances, including Kent's on 18 and 19 October.