Bank-Fund Convergence:
The “Retranchement” Story

Key Takeaways

• Banks did not exit private credit after the 2023 regional banking stress. According to Barclays research cited in Oxane's Private Credit+ report, US bank lending to non-bank lenders has quintupled over the past decade to well over $1 trillion, now more than 10% of all US banking loans.
• This is re-tranchement, not retrenchment. Banks have moved up the capital structure into senior financing, warehouse lines, back leverage, and fund finance, while private credit managers take on more junior, asset-linked exposure.
• Oxane's Compass 2026 survey found the pattern is now structural rather than cyclical: 92% of private credit firms and 85% of banks both report they are actively scaling, funding different layers of the same deals rather than competing head-on for the same loan.
• Strategic partnerships between banks and asset managers, including UBS and General Atlantic, Barclays and AGL Credit Management, and Citigroup and Apollo, are formalizing this convergence, which raises the operational bar for firms on both sides to maintain a shared, consistent view of risk.

For most of the past decade, the private credit growth story was told as a simple handoff. Banks pulled back after the global financial crisis and after the 2023 regional banking stress, and non-bank lenders stepped into the gap they left behind. That version of events is true as far as it goes, but it stops short of what is actually happening in 2026. Banks never really left. They moved.

For anyone looking for the private credit market explained beyond the traditional bank-versus-non-bank narrative, the more accurate story is how both sides increasingly finance different parts of the same transaction.

From Retrenchment to Re-Tranchement

Oxane's 2025 report on the Private Credit+ opportunity described this shift using a specific term: re-tranchement. While bank retrenchment drove the initial growth of private credit, banks are no longer stepping back. They are stepping up the capital structure, taking less risk while remaining deeply involved in how deals get financed.

The scale of this is not small. Barclays research cited in the report found that US bank lending to non-bank lenders has quintupled over the past decade to well over $1 trillion, now accounting for more than 10% of all US banking loans and nearly 5% of all bank assets. Banks are providing that capital through portfolio financing, warehouse financing, asset-based lending, back leverage, and fund finance to private credit and private equity firms directly.

The strategic partnerships forming on top of that lending activity make the pattern even clearer. UBS Group and General Atlantic, Barclays and AGL Credit Management, and Citigroup and Apollo Global Management have all signed collaborations that pair bank origination networks with the ability of funds to structure bespoke credit solutions outside bank regulatory constraints. Some deals go further, with private credit firms building origination capability by acquiring bank lending divisions outright.

Sumit Gupta, CEO and Co-Founder of Oxane Partners, walked through the mechanics of this shift for Private Equity Wire. Post-crisis capital rules under Basel III made banks materially more conservative about what they would hold on their own balance sheets, and private credit, operating outside that same capital and liquidity regime, was positioned to absorb the middle-market lending banks became less willing to carry directly. What changed was not banks' presence in the market but the position they occupy within it. Before the GFC, a bank might hold a loan across its full capital structure. Today, that same bank is far more likely to sit above a private credit fund, providing senior financing through portfolio financing, warehouse lines, asset-based lending, or fund finance rather than carrying the full exposure itself.

Why the Regulatory Response Missed the Operational Root Cause

In the months following MFS, the Financial Stability Board, the European Central Bank, and the US Federal Reserve each published reports assessing risk in private credit. Private Debt Investor's coverage of the three reports, in its July/August 2026 issue, drew a sharp distinction between them. The Fed's report focused narrowly on liquidity mismatches in semi-liquid fund structures and reached a bounded, defensible conclusion. The FSB's report drifted from a narrow definition into a broad one, lumping private equity-owned insurers, significant risk transfer, and general corporate credit under a single heading, which produced unease rather than a specific, answerable question.

The ECB's report came in for the sharpest criticism. Alternative Investment Management Association's Alternative Credit Council characterized its approach as building a market-wide crash scenario into the assumptions rather than deriving it from the data. Having found little direct risk, the ECB turns to a simulated shock, as the analysis put it, layering a severe software-borrower stress, a private credit default wave, and a 30% equity market fall on top of a segment the report itself concedes is small and largely offshore.

What all three reports share, regardless of how rigorous each is individually, is a focus on disclosure obligations and systemic exposure thresholds. None of them addresses the more mundane, more fixable problem sitting underneath the MFS situation: whether a single obligor's exposure can actually be reconciled across every manager, servicer, trustee, and financing vehicle touching that borrower at any given moment. That is not a disclosure gap. It is a data infrastructure gap, and it exists well below the level any of these three reports were built to examine.

That repositioning still leaves private credit funds dependent on something banks retain in abundance: origination reach built over decades of middle-market and SME relationships. Funds benefit from that reach directly, with banks frequently sourcing deals and introducing borrowers while funds supply the capital and execute the transaction alongside them.

What Compass 2026 Found: Convergence Is Now Structural

Oxane's own Compass 2026 survey, fielded across more than 380 senior credit professionals between February and April 2026, found evidence that this convergence has moved well past a handful of headline partnerships. Ninety-two percent of private credit firms surveyed say they are actively scaling, compared with 85% of banks. Both figures are high. Neither side is retreating.

What the survey captured is not two separate growth stories running in parallel. It is one connected credit ecosystem, where banks and non-bank lenders increasingly fund different layers of the same capital structure rather than competing for the same loan.

For readers seeking the bank fund convergence meaning, this is it in practice: banks and private credit funds are no longer operating in separate lanes but are increasingly supporting different layers of the same capital structure. Put another way, bank fund convergence explained is the evolution from competition to collaboration across credit markets.

Private credit managers are taking more junior, asset-linked positions, while banks remain present through the senior part of the stack. That division of labor is precisely what re-tranchement looks like in practice, now showing up consistently enough across hundreds of firms to count as a market structure rather than a collection of individual deals.

Fund finance is one of the clearest expressions of this. Michael Arougheti, CEO of Ares Management, has compared today's fund finance market to where direct lending stood back in 2010, describing it as a market poised to more than double in the next few years. Compass 2026's own numbers support that trajectory: 60% of firms surveyed are already active in fund finance, trailing only asset-based finance in adoption, with fund finance's NAV lending and subscription line structures increasingly financed through exactly the kind of bank-fund collaboration described above. Oxane's earlier piece on NAV finance technology covers how that facility type works in more detail.

The Three Ways Banks Stay in the Game

Gupta's account for Private Equity Wire breaks the re-tranchement pattern into three distinct postures, and not every bank is picking the same one. Some are formalizing the relationship through named strategic partnerships, pairing their origination networks and borrower relationships with a fund's capital and structuring flexibility. Citi's tie-up with Apollo and UBS's with General Atlantic both fit this mold. A second group has taken the opposite approach, competing with private credit funds directly rather than partnering with them, through in-house asset management arms such as Goldman Sachs Asset Management and Morgan Stanley Investment Management that originate and hold credit exposure on their own. A third group avoids lending exposure altogether and instead earns a role through agency work, servicing, or back-office infrastructure supporting deals that private credit funds originate and hold.

Whichever posture a given bank adopts, the underlying data problem is the same: multiple parties now need a consistent view of the same underlying exposure, and the mechanisms for maintaining that view are still being built out in real time rather than already mature.

Where the Friction Shows Up

Closer cooperation between banks and funds does not eliminate operational friction. It relocates it. Banks typically require funds to disclose details like available borrowing capacity before a bank's own compliance process can clear a facility, and a fund working with several bank counterparties on overlapping SME exposure ends up repeating that disclosure work for each relationship separately. That burden intensifies whenever private credit itself comes under outside scrutiny, a dynamic playing out this year around the software-sector stress some have nicknamed the SaaSpocalypse.

Two developments from earlier in 2026 show what that intensified scrutiny looks like in practice. Retail investor redemptions from semi-liquid funds pushed several large managers toward more frequent net asset value reporting, and Apollo said in March that it would move to monthly NAV reporting with an eventual goal of daily figures. Separately, banks that extend leverage against collateral sitting inside private credit vehicles have started pushing for stronger contractual rights to revalue that collateral on a mark-to-market basis as conditions shift, rather than relying on periodic valuations alone. Gupta frames the moment less as a signal of systemic danger today and more as a prompt for both banks and funds to sharpen due diligence and confirm underwriting discipline actually holds up in practice. Should the pressure persist, he expects banks to concentrate their attention on larger counterparties first, which would leave private credit funds absorbing a larger share of the smaller financings banks step back from.

Where the Convergence Is Showing Up

Beyond the strategic partnerships described above, the pattern is visible across the parts of the market growing fastest. Warehouse financing and back leverage arrangements, where banks fund a private credit vehicle's asset accumulation ahead of permanent financing, sit squarely inside this re-tranchement pattern. Asset-based lending, where banks increasingly provide leverage to specialty finance platforms rather than originating the underlying loans themselves, follows the same logic.

Daniel Pietrzak, Global Head of Private Credit at KKR, has described the broader shift in similarly expansive terms: for large managers, private credit now spans direct lending, junior debt, and asset-based finance across corporate and consumer markets simultaneously, rather than sitting in any single lane. That breadth is exactly why the bank layer and the fund layer end up touching the same underlying exposure more often than a simple direct-lending frame would suggest.

What This Means for Portfolio Management Technology

Absorbing the operational load that tighter underwriting will place on both banks and funds takes purpose-built infrastructure, not a workaround stitched together from each side's existing systems. Oxane Panorama was built over more than a decade around exactly that requirement, digitizing the underlying data so both a bank and a fund financing the same deal can work from the same picture of it. As Gupta put it to Private Equity Wire, "our technology exists to serve both ends of the market," a position he notes very few credit-focused platforms actually occupy.

Oxane supports both sides of this relationship directly, working with 23 of the top 30 global banks and 13 of the top 30 global private credit funds, helping banks and buy-side firms operate from a consistent view of portfolio data and risk. That dual vantage point is part of what makes the convergence visible in the first place: the same infrastructure gaps tend to show up on both sides of a deal, just from different angles.