Speaking at an investor event hosted by Clifford Capital on Dec 2, Rajan warns that private credit has not been subject to the same scrutiny as other established instruments.
In the years since the Global Financial Crisis (GFC), large banks have “backed off” from direct lending, opting to lend indirectly via private credit instead. There, regulations are “more favourable”, and new forms of private credit even allocate risks better, assigning people the “appropriate risk for the appetite that they have”, says Indian economist Raghuram Rajan.
Rajan, who served as the International Monetary Fund’s chief economist between 2003 and 2006, rose to fame for warning about growing risks in the financial system three years before the GFC broke out.
