Wall Street banks are seeing a potential opportunity to reclaim market share from private credit lenders, as strains emerge in the private credit sector and banking regulations ease [1]. According to Moody's chief economist Mark Zandi, "Interest rates have declined and banking regulation has eased. Private credit lenders are also struggling with the fallout from their previously aggressive lending" [1]. This shift follows a decade in which private credit lenders rapidly expanded, taking over a large share of financing for leveraged buyouts, especially after the Federal Reserve's aggressive rate hikes and the 2023 banking crisis led banks to tighten underwriting and pull back from riskier deals [1].
PitchBook data cited in the article shows that banks' share of buyout financings above $1 billion dropped to 39% in 2023, down from about 80% in the five years prior. However, this share has since recovered to just over 50% in 2025, indicating a partial comeback for banks [1]. The private credit sector is now facing challenges, including higher interest rates making it harder for heavily indebted borrowers to repay loans, increased default risks, and rising investor demand for liquidity as some clients seek to pull money after years of locking up capital [1].
Moody's Zandi expects the private credit sector to "experience more credit problems in the coming months," citing fallout from geopolitical tensions, higher borrowing costs, and structural pressures in industries such as software. Consumer and healthcare borrowers may also come under strain [1].
Regulatory changes are also providing tailwinds for banks. Shannon Saccocia, chief investment officer at Neuberger Berman, noted that anticipated deregulation from the Trump administration includes a likely weakening of the Basel III Endgame implementation, with the U.S. Treasury aiming to redirect business lending back into the banking sector [1]. The Basel III Endgame framework, finalized in 2017, standardized risk calculations and required banks to hold more reserves against loans, making bank lending less competitive versus private credit funds. A weakening or reversal of this framework is expected to increase competition for private credit [1].
CONCLUSION
Wall Street banks are positioned to regain market share from private credit lenders as regulatory easing and sector-specific strains shift the balance. Key figures show banks' share of buyout financings rebounding, while analysts expect further credit problems for private credit. The market takeaway is a medium-impact shift favoring traditional banks, with regulatory changes likely to accelerate this trend.