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Deutsche Bank, Europe’s biggest lender by assets, has stopped renewing lending facilities for private credit funds that fail to generate adequate returns. The move signals a meaningful shift in how traditional banks are approaching an asset class that has ballooned in size since the global financial crisis.
The German bank reported roughly €26 billion (about $30 billion) in private credit exposure as of the end of 2025, up from €24.5 billion the prior year. So even as the bank was growing its exposure, it was apparently becoming more selective about which funds deserved the privilege of borrowing its money.
A quiet credit squeeze
Private credit exists in large part because banks pulled back from direct lending after 2008. Regulators made traditional bank lending more expensive, and private credit funds rushed in to fill the gap. Now those same banks that stepped aside are also the ones providing leverage and credit lines to the funds that replaced them.
Deutsche Bank isn’t alone. JPMorgan has also reportedly cut back credit lines to private credit funds following previous markdowns.
Deutsche Bank has emphasized that its portfolio remains diversified and has not experienced significant losses to date.
Why private credit is under pressure
The private credit market has grown to approximately $1.8 trillion.
Several forces are converging to make 2026 uncomfortable for private credit. Investor redemptions have increased, which means funds need to return capital to their backers at the exact moment when finding exits or refinancing is getting harder.
The rapid advancement of artificial intelligence is creating particular stress among software borrowers, a segment that private credit funds loaded up on during the low-rate era.
Rising interest rates have compounded the problem. Many private credit deals were structured when rates were near zero, and the math simply works differently when borrowing costs are elevated.
Underwriting practices are also facing fresh scrutiny. During the boom years, competition among private credit funds drove some to loosen their standards, accepting thinner covenants and higher leverage ratios.
What this means for investors
When major banks tighten credit standards for these funds, the effects ripple outward into private equity, venture capital, and alternative lending strategies that depend on readily available leverage.
Funds that relied on continuous access to bank credit lines will need to either find alternative sources of leverage, accept lower returns, or reduce their lending activity.
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