Rather than displacing traditional bank lending, private credit has absorbed higher-risk exposures and helped reduce systemic risk within the banking industry, according to a report on Singapore’s private credit sector by KPMG. By transferring riskier assets to non-bank lenders, commercial banks have been able to optimize their balance sheets and enhance capital efficiency.

Under this evolving dynamic, conventional banks remain focused on core relationship-based senior loans, transaction banking, working capital, and highly regulated, balance-sheet-efficient financing. Conversely, private credit funds are increasingly taking on customized and structured deals, elevated leverage, transitional exposures, special situations, and stressed capital.

As a result, private credit providers are assuming greater responsibility for managing early-stage risks, negotiating complex covenant structures, and leading debt restructurings. KPMG notes that this shift elevates private credit from a simple alternative funding source into a systemically important player, where long-term success depends heavily on a fund’s capacity to navigate corporate transitions and financial distress.

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