Bank of Canada Tracks About $500 Billion in Private Credit Exposure and Spillover Risks

By Tahani Elghazaly
Published August 23, 2026

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The Bank of Canada estimates that private lending held by Canadian investors, combined with loans from Canadian banks to private credit funds, totalled about $500 billion around the beginning of 2026, creating potential channels through which turmoil abroad could affect Canada’s financial system. The Bank says direct risks currently appear manageable.

Private credit refers broadly to business loans made by non-bank lenders through privately negotiated agreements, rather than traditional bank lending or debt issued in public markets. The sector has expanded rapidly around the world in recent years.

Most Canadian exposure to private credit is outside the country, particularly in the United States. Canada’s three largest life insurers held just over $200 billion in private credit investments in the first quarter of 2026, while large Canadian pension funds held an estimated $215 billion at the end of 2025.

Canadian investment funds held about $54 billion in private credit in 2025, an increase of more than 60% since 2020. Canadian banks also had at least $40 billion in loans to private credit fund managers in the first quarter of 2026.

Despite those figures, Canadian businesses remain relatively limited users of private credit. Loans from non-bank lenders have accounted for about 15% of external financing for Canadian non-financial businesses over the past decade, with banks and public debt markets remaining the main sources of funding.

The Bank of Canada says limited transparency, complex structures and growing connections between private credit funds and banks make it difficult to determine where vulnerabilities are concentrated and how losses could spread during a downturn. Stress abroad could tighten global financing conditions and reduce credit availability for Canadian businesses.

At the same time, the Bank says Canadian institutional exposures appear manageable. Large pension funds and life insurers generally have long investment horizons and experience managing private credit risks, but the sector continues to warrant monitoring as it becomes more closely connected to the global financial system.