ASIC Private Credit Warning: How Funds Can Respond to Rising Valuation and Lending Risks
Synopsis
ASIC is increasing scrutiny of private credit funds, focusing on valuations, disclosure, governance and lending controls following market stress.
Corporate regulator ASIC is watching private credit more closely, and is warning fund managers that poor lending, valuation, disclosure and governance practices will result in enforcement action.
Multiple enforcement investigations are underway, and ASIC's latest eight weeks of surveillance included 22 managers and 52 funds and approximately A$76 billion in assets under management, ASIC said. The survey is not comprehensive of Australia's private credit industry, the regulator said.
This follows concerns over houses being overvalued against the worsening conditions of the borrowers. ASIC has pointed out that defaults have risen, impairments have increased, more loans have been amended and some portfolios are experiencing stress, particularly in the property development and construction category.
In December 2025 the Reserve Bank of Australia estimated that the value of private credit outstanding was around A$50 billion and assets under management were believed to be A$224 billion, according to an estimate by Alvarez & Marsal quoted by the RBA. The disparity is because of data availability and the measurement method of private credit.
Bathla Collapse Puts Lending Controls in Focus
The warning by the ASIC private credit issues comes on the back of the collapse of Bathla Group, an NSW-based developer that went under with approximately A$3.4 billion in known creditor claims.
Approximately A$3.08 billion was due to secured creditors and A$145 million to the Australian Taxation Office, A$42 million in land tax and approximately A$130 million due to other unsecured creditors. The interim estimate of 219 sites was estimated to be approximately A$4.9 billion, but was not cash immediately available to creditors, administrators said.
Reporting on ASIC's concerns suggests that Bathla's debt was owed to 40 lenders and approximately 542 special purpose vehicles. The configuration has created focus on the evaluation of the borrower groups, related entity, collateral and concentration risks.
ASIC's message here is that valuation reviews shouldn't be postponed for a formal default for private credit managers. Property revaluation can be conducted by managers when the circumstances of projects are impacted by changes in construction costs, project delays, reduced presales, unsold stock or refinancing conditions.
What Private Credit Funds Can Do Now
The ASIC private credit guidance also underlines the significance of ongoing and sustainable valuations. Fund managers will have the capability to review the assumptions made to determine loan values, document the evidence used to determine these assumptions and ensure that boards, auditors and responsible entities have adequate information to question those assumptions.
Managers also can further the separation of lending decisions from independent evaluations of loan performance. The earlier ASIC surveillance spotted that less than half of the 28 funds sampled had written policies, which had been detailed, on credit, impairment and defaults.
Disclosure is another area that needs to be addressed. Funds can provide more information regarding fees, interest rate, arrears, impairment, loan modification and portfolio risks, to provide a consistent basis for investors to assess performance.
Concentrations also will be investigated. ASIC has identified a category of portfolios where there are substantial holdings by one or more individual developer groups or related assets which it believes needs to be better managed, if the property market slows.
Global Markets Show Similar Pressure Points
Australian credit markets have attributes that distinguish them from overseas private credit markets, particularly in terms of the greater share of property and construction loans. ASIC warns, however, that the United States and Europe already are witnessing increases in defaults, valuation uncertainty and redemption pressures.
Private credit is still less than 2% of financial-system assets, and non-bank lenders make up about 6%, the RBA says. The sector's financial stability risks are 'relatively low' due to its small size, it added, while private credit is growing 'significantly.'
So, for private credit managers in Australia, the next move is to ensure that evidence-based valuations, governance, and reporting to investors is enhanced and risks on the borrower and portfolio are scrutinised more closely, as ASIC's surveillance continues to turn towards enforcement.
Source: AFR
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
