There is growing regulatory scrutiny around the world when it comes to private debt markets, especially after questions about valuations, capital purchases and credit ratings were raised following the widely publicized crisis in the US.
But there seems to be a big difference in the areas of focus of the regulators and their approach.
The most important change is the EU’s Alternative Investment Fund Managers Directive (AIFMD II), which came into force from 16 April 2026. It creates a new category of funds “from loans”, which captures many private lending vehicles, and imposes a strict limit of 175 percent of the total value of assets and 30 percent of open capital.
In Europe, the European Securities and Markets Authority (ESMA) is also looking at sovereign credit ratings, and asked the industry to submit comments by the end of May.
The UK is using its post-Brexit flexibility to prioritize growth and is looking to eliminate some of the rules it sees as too restrictive, for example removing the AIFMD-based legislation and removing restrictions that currently restrict micro-managers from a full-scope regime.
Read more: Private debt is subject to stricter EU rules under AIFMD II
Meanwhile, in the US, the focus was on opening up access, with the Department of Labor (DOL) proposing legislation that would allow 401(k) to plan retirement channel savings into private debt and other means using a safe harbor weighted by performance, fees, liquidity, valuation, ratings, and complexity. The Securities and Exchange Commission, meanwhile, has marked that private credit among the priorities of its 2026 tests.
The Australian Securities and Investments Commission has made bad private debt practices a top enforcement priority by 2026, directing disclosure of payments, disputes, and valuations after finding widespread defaults.
And in Hong Kong the new fund tax reforms covering private debt provide exemptions from interest and performance fees, which will be a welcome move for fund managers.
Finally, globally, the Financial Stability Board has warned in a recent report that the concentration of private debt, and banking connections remain unchecked in the downturn. It encourages authorities in particular to close data gaps and improve monitoring, so that there will be more publications related to this in the future.
Read more: Proposed new rule for choosing 401(k) alts investments
What to watch for the second half of the year:
- The comment period on the DOL’s proposed safe harbor in the US closed on June 1, so the final rule is expected later in the year.
- EU AIFMD II reform: Although the main rules apply from April 2026, ESMA’s technical standards and guidelines are still being finalized, and many countries have not started to introduce changes in national laws yet.
- ESMA’s request for comments on private credit ratings closed at the end of May, so it is now reviewing the responses and will assess whether regulatory action is needed.
- An application for the Financial Conduct Authority (FCA) in the UK regarding the future regulation of some fund managers closed on 9 June and the regulator will consult on the details rules.
- The FCA is also discussing final rules to reduce the qualified client limit with final rules expected in the second half of the year.
Read more: The FCA is trying to loosen the rules for wealthy investors
