Banks Quietly Loaded Up on Private Credit Risk. The Cycle Is Now Turning

NEW YORK, March 12, 2026 /PRNewswire/ -- Whalen Global Advisors ("WGA") has just released The IRA Bank Book Q1 2026, that delivers a hard look at the operating realities and credit risks building beneath the surface of the financial system. The 30+ page deep-dive reviews the strange and unusually profitable conditions that defined 2025 and lays out what may be a far more volatile year ahead for banks and investors alike.

"The year 2025 was an extraordinary and deeply distorted period for many reasons, including low credit loss rates and soaring asset values," notes WGA Chairman Christopher Whalen. "But history teaches us that these conditions rarely last. QE teaches us that high asset prices suppress the cost of credit, until asset values fall. UBS believes defaults in private credit could reach 15% roughly three times the peak delinquency rates experienced by bank loans during the 2008 financial crisis."

The report also sounds the alarm on a rapidly growing and largely underappreciated risk: the rising exposure of US banks to non-depository financial institutions, including private credit funds, credit managers, and private equity sponsors that now sit at the center of the shadow banking system. The report includes WGA's proprietary estimate of the contingent credit exposure of U.S. banks to these NDFIs, a number that may surprise investors who assume bank balance sheets are insulated from the private credit boom.

"In the 1920s, many observers believed that asset values had reached a 'permanently high plateau,'" notes Whalen. "We are hearing similar language today. Sectors like private equity and credit, and AI, all promise higher credit costs ahead. When credit costs rise, earnings decline and stocks follow. The sharp and sudden declines in bank stocks in February may be an early reminder of that dynamic."

The IRA Bank Book Q1 2026 is available for purchase in The IRA online store and to subscribers to The IRA Premium Service which provides ongoing analysis of bank risk, credit markets, and financial system stress points.

About Whalen Global Advisors LLC

Whalen Global Advisors LLC (WGA) is a New York-based consulting, risk analytics and publishing company focused on the intersection of financial institutions, credit markets, and global macro risk.  WGA publishes The Institutional Risk Analyst (ISSN 2692-1812), the IRA Bank Book (ISBN 978-0-692-09756-4) quarterly review, and the widely followed WGA Top Bank and Top Precious Metals rankings. For additional information, please contact us at: [email protected]

SOURCE Whalen Global Advisors