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Private Credit: Risks and Benefits of a Maturity Wall

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  • Albuquerque, Rui
  • Zawadowski, Adam

Abstract

A maturity wall arises when private credit funds reach the end of their term and can no longer roll over loans. Unlike banks, which face no maturity wall, private credit funds use the maturity wall as a credible commitment to liquidate distressed borrowers, thereby strengthening ex-ante incentives, albeit at the cost of ine!cient liquidation. The model predicts that private credit ex-pands aggregate credit supply, reallocates riskier loans away from banks, and amplifies aggregate downturns. Private credit funds emerge as a mechanism that approximates the second-best optimal contract when full commitment is unattainable.

Suggested Citation

  • Albuquerque, Rui & Zawadowski, Adam, 2025. "Private Credit: Risks and Benefits of a Maturity Wall," CEPR Discussion Papers 20737, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20737
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    File URL: https://cepr.org/publications/DP20737
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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