Bank of Canada Governor Tiff Macklem at an event in Toronto last month. Mr. Macklem spoke Wednesday for the first time about the growing influence of non-bank players lending money to businesses.Fred Lum/The Globe and Mail
Bank of Canada Governor Tiff Macklem is urging market watchdogs to take a closer look at private credit as the rapid rise in alternative lending raises new potential risks to the global financial system.
In a speech to the Global Risk Institute in Toronto on Wednesday, the central banker made his first public comments on the growing trend of businesses borrowing huge sums of money from non-bank lenders.
The global private credit market now measures in the trillions of dollars and its growth is only expected to continue, but Mr. Macklem warned the sector lacks the same level of transparency offered by public debt markets.
“Private credit is more opaque,” Mr. Macklem said. “Unlike public credit markets, private credit positions are not regularly marked to market. Assessing underwriting standards, covenant quality and the true degree of embedded leverage can be difficult.”
Regulators need better visibility into the inner workings of the expanding world of private credit, he said, adding “the interconnections between private credit and banks” also need to be better understood.
His concerns align with issues raised by investor advocates about the limited disclosures offered by private debt funds. Those funds have faced mounting controversy as a growing number of them have blocked investors from cashing out.
More recently, the Ontario Securities Commission’s efforts to establish a new class of mutual funds that can hold higher-risk private assets, including private debt, have faced resistance from both investor advocates and industry insiders.
According to the OSC’s annual investment fund survey, the number of private asset investment funds in Canada’s most populous province has nearly doubled over the past five years, from 184 in 2020 to 354 by the end of 2024.
Those funds collectively held $113-billion in assets, with nearly one third of that total – $36-billion – invested in private debt.
“The opacity of private credit means investors may not have enough information about the quality of loans held in their funds,” Mr. Macklem said. “A spike in defaults could prompt them to try to exit their positions quickly. This could cause severe strains.”
There have been several recent examples of strain in private credit markets. Last August, Trez Capital Mortgage Investment Corp., one of Canada’s largest private commercial mortgage providers, halted redemptions from five of its funds.
Most recently, in mid-January, Toronto-based private lender Courtland Credit Group Inc. halted redemptions on its flagship fund, citing trouble with a single borrower that comprised a large portion of its loan portfolio.
Those halts can remain in place for years, as investors in private mortgage lender Romspen can attest.
In late 2022, Romspen froze all investor redemptions and that freeze remains in effect to this day. In the years since, Romspen has cut its monthly distribution multiple times, meaning its investors now earn much lower-yielding payouts while their money remains trapped.
Although recent high-profile problems have been contained, Mr. Macklem said “they raised questions about the quality and transparency of underwriting.”
Because banks and insurers are linked to private credit through lending, sponsorship, warehousing and risk transfer, Mr. Macklem said “weakness in private credit could spill back to the regulated sector. And because private credit is increasingly global, those spillovers could travel quickly across borders.”
He stressed that the rise of non-bank players in global debt markets “is not a problem to be solved” as private credit “fills real gaps” in the corporate financing ecosystem.
“It has increased competition in credit markets and broadened access to funding,” Mr. Macklem said. “And it’s playing an important role in supporting new investment cycles. Private credit is expected to be an important source of the debt funding needed to grow AI infrastructure.”
The rise of private credit has accelerated in Canada over the last year in particular, according professional advisory firm MNP LLP, as companies that are more exposed to economic headwinds such as tariffs have struggled to secure traditional financing.
“Private credit emerged as a vital support system for Canadian business owners and entrepreneurs amid the uncertainty of the past year,” MNP said in an October, 2025, report. “An estimated $5-trillion to $6-trillion in assets could migrate to non-bank lenders over the next decade, reshaping the lending landscape.”
Mr. Macklem said the Financial Stability Board, a global body where he serves as chair of the standing committee for the assessment of vulnerabilities, is “working to improve understanding and monitoring of private credit” in hopes of allowing regulatory authorities to more closely monitor the sector.
“Surveillance needs to be enhanced so we can monitor how risks evolve as this market grows,” he said. “The issue is not private credit itself. It’s how private credit will behave under stress – and the risks it poses to the broader financial system."