Private credit: friend or rival of banks?

Each has a role to play in helping corporate borrowers to grow and thrive.

- By Rewin Pataibunlue

Private credit has become one of the fastest-growing segments of global finance, raising an important question in Thailand: Will private credit compete with banks or strengthen the financial system by complementing them?

While headlines sometimes portray the two as rivals, global experience points to a different reality. Banks remain the backbone of national credit systems, while private credit has emerged as a specialised partner that can step in with capital during periods when banks — due to regulatory limits, risk-control requirements or slower approval cycles — are unable to provide full financing.

As Thailand enters the early stages of developing its private-credit ecosystem, the relationship between banks and private credit is already shifting toward coordination rather than competition, shaped by their different mandates, capital sources and regulatory environments.

COMPLEMENTARY ROLES

Banks and private credit both serve corporate borrowers, but their operating models differ fundamentally.

Banks operate with deposit-funded balance sheets under Basel III/IV rules that prioritise financial stability and risk-weighted capital discipline. These regulations enable banks to deliver competitively priced loans across the economy but also impose strict constraints — sector caps, single-obligor limits, collateral standards and internal credit policies — that may restrict lending during periods of elevated uncertainty. Banks excel at:

Private credit funds, by contrast, deploy committed institutional capital from pension funds, sovereign wealth funds, insurers and endowments. Their mandate is to generate stable, risk-adjusted returns through deep underwriting, structural protection and bespoke terms.