The scale of the shift
Private credit AUM reached nearly $2 trillion in 2024, growing nearly tenfold from pre-GFC levels. Industry projections place that figure above $4 trillion by 2028, with non-bank lenders now originating more than 60% of sub-$100 million corporate loans. Middle-market sponsor lending alone is on a trajectory to reach $2 trillion by 2026.
The liquidity signal is equally instructive. Evergreen private credit funds—the semi-liquid structures that have broadened institutional access to direct lending—held $644 billion in AUM as of June 30, 2025, up 28% from year-end 2024 and approximately 45% year-over-year. Direct lending within these evergreen structures surged from $63.3 billion in 2022 to $209 billion in 2025. First-lien middle-market yields compressed to a 9.16% average all-in during Q4 2025—tightening 59 basis points with spreads narrowing to 500 basis points —a clear signal that markets are pricing in permanence. Private credit is no longer a premium alternative; it is becoming the default infrastructure for middle-market finance.
Basel III as a structural accelerant
Regulatory architecture is amplifying this reallocation. The Basel III Endgame, with capital and market-risk requirements effective July 1, 2025 and phasing through June 30, 2028, materially increases the cost of holding leveraged and acquisition finance on bank balance sheets. Banks with assets over $100 billion face the most direct impact, but the economic logic cascades through the broader commercial lending stack.
The practical consequence is a reconfiguration of roles. Banks will increasingly serve as arrangers, hedgers, and providers of subscription lines and liquidity facilities to private credit platforms—while transferring principal risk to non-bank entities. Significant Risk Transfer (SRT) transactions, which allow banks to shift credit exposure off-balance-sheet, are accelerating precisely in this context. Banks are not retreating from credit markets; they are repricing their value proposition within them.
The origination-as-a-service model takes shape
The architecture that is emerging can be described precisely as origination-as-a-service: banks providing underwriting capacity, compliance infrastructure, KYC/AML frameworks, and servicing operations to private credit funds that deploy the actual capital. In this model, the bank functions as a regulatory wrapper and data custodian—not a principal lender.
Market consolidation reinforces the direction. Asset managers are systematically assembling the capabilities that were once held within integrated bank franchises. Credit secondaries fundraising reached a record $16 billion in the first three quarters of 2025 alone, reflecting institutional appetite for liquidity management within private credit—and pointing toward a market that is rapidly professionalizing its own infrastructure. Banks that do not define their role in this new stack risk being excluded from the most profitable segments of commercial lending.
Implications for banks
The strategic question facing bank leadership teams is not whether this transition is real—the data is unambiguous. The operative question is whether the institution will define its role deliberately or arrive at it by default.
- Rebuild the P&L around fee-based economics. Banks transitioning to origination-as-a-service must systematically realign sales incentives, pricing architecture, and profitability metrics around transaction fees, servicing income, and platform revenue—not net interest margin. This requires rewiring internal performance management, not just adding a fee income line.
- Make partnership ecosystems a core competency. Relationship management with private credit funds, documentation infrastructure for co-lending and SRT structures, and capital market distribution alliances must be treated as strategic capabilities. Banks that view these as vendor relationships rather than strategic partnerships will consistently underperform on deal flow and margin.
- Treat data as a monetizable asset. The bank's enduring advantage in this new architecture is the quality and depth of its borrower data—proprietary underwriting signals, behavioral credit metrics, and compliance audit trails. These assets can be made available to private credit partners as part of a broader infrastructure offering, but only if banks invest in the governance and technical infrastructure to surface them effectively.
- Conduct balance sheet triage now. With Basel III capital charges making sub-$100M corporate loans structurally costly to hold, management teams need a clear and repeatable framework for segmenting their credit portfolios into hold, co-originate, and exit categories—before regulatory pressure forces the decision reactively.
Implications for technology providers
The structural shift creates a well-defined opportunity for technology vendors positioned at the intersection of regulatory compliance and private market workflow.
- Compliance-as-a-service platforms that can extend bank-grade AML, KYC, and CRA frameworks to non-bank lenders will be in high demand as private credit funds seek to access bank distribution infrastructure without building independent regulatory operations.
- Loan origination and servicing platforms that support co-lending structures, multi-party waterfall logic, and real-time covenant monitoring at sub-$100M ticket sizes are critically underbuilt relative to the volume coming to market.
- Data interoperability layers that allow banks and private credit funds to share underwriting data, portfolio analytics, and borrower monitoring without compromising regulatory boundaries represent an emerging and largely unclaimed infrastructure category.
- Liquidity management tooling for evergreen fund managers—covering redemption modeling, cash drag optimization, and secondary market pricing—will become table-stakes as the $644 billion in semi-liquid private credit AUM continues to compound.
The unbundling of bank capital is not a forward-looking scenario. It is an operating reality, already priced into regulatory frameworks, fund structures, and M&A activity simultaneously. Institutions that move with deliberate speed—defining their role, rebuilding their economics, and investing in partnership infrastructure—will find durable competitive positions in this new architecture. Those that wait for greater clarity will find fewer options and less leverage when they eventually act.
