Hong Kong banks face private credit scrutiny as HKMA sounds alarm

Reported net asset values of funds can lag actual conditions by several months, KPMG said.

Hong Kong banks must review their existing risk infrastructure as private credit take-up ramps up in the city.

The Hong Kong Monetary Authority (HKMA) has expressed concerns about the rapid growth of private credit and its potential systemic implications, KPMG noted in its 2026 banking report.

“A fund-level view is no longer sufficient; regulators increasingly expect a look-through analysis to the individual exposures beneath,” KPMG wrote.

Traditional risk appetite statements may not adequately capture the specific characteristics of private credit exposures, KPMG warned.

These exposures include the illiquidity, the valuation uncertainty, the concentration dynamics, and the reputational dimensions.

However, accurate valuation remains a persistent challenge.

KPMG said that reported net asset values from funds can lag actual conditions by several months, and the degree to which a bank or its clients can independently validate those valuations varies considerably.

“For banks whose clients are invested in private credit, or for those with direct exposures on their own books, the question of whether existing valuation governance is fit for purpose deserves serious attention,” KPMG warned.