Retrenchment by the banking sector will create a $1tn-$2tn opportunity for credit funds to fill the void in Europe in the coming decade, according to the International Monetary Fund and Citi.
The IMF has estimated that European banks will need to reduce their asset base by $2.6tn in the wake of the financial crisis. As a result, Citi argued that Europe will follow the lead of the US, where the banking sector's share of lending has fallen from 75 per cent in the 1950s, to less than a third today.
This could see European banks partially switch from being holders of debt to becoming administrators, specializing in facilitating loans by third parties.
"Many borrowers may struggle to find lenders who can meet their credit needs. It is this gap in the availability of credit that matters, and credit funds are beginning to help address this issue,” said John Reidy, director of alternative investments at Citi Transaction Services

Source: By Steve Johnson, Financial Times

Credit funds could become lenders