(HecdgeCo.Net) Bank of America’s decision to commit $25 billion of its own balance sheet to private credit is more than a new initiative—it’s a signal that the boundary between banks and alternative asset managers is continuing to blur, and that the private credit boom has reached a stage where the largest U.S. lenders can no longer afford to stand on the sidelines.
Reuters flagged ongoing concerns about credit quality and exposures, including sensitivity to sectors facing disruption. In 2026, that debate increasingly centers on whether certain software and tech-enabled business models—long favored by both private equity and private credit—face new competitive pressures from AI-driven commoditization.
The move, detailed in an internal memo reported by Reuters and also covered by Bloomberg, positions Bank of America to originate and hold private-credit exposures in a market that has historically been dominated by firms such as Apollo, Ares, Blackstone, KKR and Blue Owl. And it comes at a moment when the sector’s growth story is colliding with a new wave of scrutiny—around liquidity, pricing transparency, and what happens to credit performance if the economy slows or refinancing windows narrow.
For allocators, borrowers, and competing lenders, the message is clear: private credit is no longer a niche adjacency to leveraged finance—it is becoming core plumbing for corporate America.
Why this matters now
Private credit has been building momentum for years, fueled by three structural forces:
1) Bank retrenchment and regulation.
Post-crisis capital rules and supervisory pressure made many banks less willing to hold certain types of leveraged loans on balance sheet—especially for borrowers with higher leverage, less stable cash flows, or complex capital structures. That retreat created an opening for non-bank lenders.
2) Borrower demand for speed and certainty.
Direct lenders can often offer faster underwriting, more flexible covenants, and “one-stop” financing packages that reduce execution risk—especially attractive in volatile markets.
3) The rise of scale platforms in alts.
Private credit managers have institutionalized origination, underwriting, and portfolio management—building capabilities once associated primarily with banks.
Bank of America’s $25 billion commitment is a recognition that private credit is now too large—and too strategically important—to ignore. Reuters reported that the plan is aimed at furthering the bank’s advance in the fast-growing segment.
“If you can’t beat them, join them”—with your own balance sheet
Historically, banks served private credit in indirect ways: financing sponsors via syndicated loans, arranging bonds, or providing revolvers and ancillary services. What’s different now is the bank using its own capital to expand direct lending activities more deliberately—an approach increasingly mirrored by competitors.
This is part of a broader Wall Street trend: big banks are realizing that they can participate in private credit economics not just as arrangers, but as principal lenders—earning spreads and fees that have migrated to alternative managers over the past decade.
It’s also a strategic defense. Private credit has siphoned away a portion of corporate lending that used to be bank territory. Committing capital is a way to reassert relevance in the financing stack—particularly when large sponsor-backed deals require certainty, speed, and bespoke structuring.
How BofA plans to play it
While the full operating details are private, Bloomberg reported that Bank of America plans to invest its own capital in private credit opportunities and originate deals through its capital markets group (within investment banking).
That detail is important: it suggests the initiative is not being treated as a side hobby, but as an extension of the bank’s capital markets franchise, where relationships with sponsors and corporates already live. That is where private credit increasingly competes—because direct lenders aren’t just replacing banks, they’re replacing parts of the syndicatedmarket as well.
The competitive benchmark: JPMorgan and Goldman moved first
Bank of America is not the first major bank to decide it needs a more explicit private credit posture.
- JPMorgan has publicly committed significant balance sheet capacity to direct lending, aiming to scale into a market it once ceded.
- Goldman has also deepened its presence in private credit through its asset management arm, with a more integrated approach across private markets.
In that context, Bank of America’s $25 billion commitment reads like a catch-up move—a necessary step to compete for sponsor and corporate wallet share in the next cycle.
The hidden driver: private credit is becoming “relationship glue”
Banks have always competed on relationships. If a sponsor or corporate CFO can get a large financing package from a private lender—one that includes speed, certainty, and customization—then the bank risks losing not only that loan, but a wider set of lucrative services tied to the relationship.
Private credit increasingly affects:
- M&A financing
- Refinancings and recapitalizations
- Asset-backed and specialty finance
- Structured solutions in stressed or transitional situations
By putting its own money into the market, Bank of America is better positioned to remain “in the room” on financings that may have otherwise migrated to the alternative ecosystem.
A bigger story: banks and alts are converging, not competing in a clean line
One of the most telling trends is that banks are not only competing with private credit managers—they are also partnering with them.
A notable precedent: Citi partnered with Apollo in 2024 on a $25 billion direct lending initiative, demonstrating how banks and mega-managers can combine origination reach and balance-sheet capital with private-market underwriting infrastructure.
This bank–alts convergence is reshaping the lending market into a hybrid model:
- Banks still bring deposit-funded stability, payment rails, and capital markets distribution.
- Private credit managers bring speed, flexibility, and a growing base of locked-up or semi-locked capital.
- Partnerships allow each side to scale what the other lacks.
Bank of America’s move does not necessarily rule out partnerships—if anything, it may strengthen BofA’s hand in structuring co-lending and risk-sharing arrangements.
The timing: private credit opportunity, private credit scrutiny
Bank of America’s announcement lands in a sensitive moment for private credit sentiment.
Reuters noted the sector has faced volatility after Blue Owl halted redemptions in a private credit fund and sold assets—events that contributed to a selloff across alternative managers.
Even when such episodes are fund-specific, they sharpen the market’s focus on a fundamental tension inside private credit:
- Investors like the yield and perceived stability.
- But private credit assets are not continuously priced like public bonds.
- Liquidity is often offered through structures that can be stress-tested in volatile periods.
When a major bank commits $25 billion into that ecosystem, it both validates the opportunity and forces the question: if banks are stepping deeper into private credit, what does that imply about underwriting standards, competition, and late-cycle behavior?
What borrowers get: certainty and customization—at a price
Private credit’s core value proposition to borrowers is certainty of execution. Instead of running a syndication process with market risk, borrowers can negotiate directly with a lender (or a club of lenders) and close quickly.
But that certainty often comes with tradeoffs:
- Higher spreads than broadly syndicated markets during calm periods
- Tighter lender protections in documentation
- More lender influence during amendments or restructurings
Bank of America’s entry with scale capital could pressure spreads at the margin—particularly for upper-middle-market borrowers and sponsor-backed financings—because banks may accept thinner economics to win strategic relationships.
What this means for alternative managers: more competition, but also more distribution
For private credit giants, the emergence of bank balance sheets as scaled competitors can mean tighter spreads and more crowded deal processes. But it also expands the market’s legitimacy and can accelerate growth—especially if bank involvement creates more standardized structures, repeat borrower behavior, and deeper refinancing channels.
The more interesting question is whether banks ultimately choose to:
- Compete head-on for origination, or
- Co-lend, warehouse, and distribute risk in collaboration with private credit firms.
If the latter, alternative managers may find that banks become a powerful distribution and origination partner, even as competitive lines blur.
The risk side: credit quality, concentration, and the “AI disruption” wrinkle
No private credit expansion story is complete without the risk lens.
If AI reduces pricing power or increases churn in portions of the software ecosystem, underwriting assumptions tied to stability of recurring revenue may need to be revisited. That doesn’t mean the sector is broken—but it does mean the dispersion inside private credit portfolios could increase, and that “safe yield” narratives may face stress in specific pockets.
The strategic conclusion: private credit is becoming too important for banks to ignore
Bank of America’s $25 billion commitment represents a strategic inflection point:
- Private credit is not just a competitor to banks; it is now a core segment of corporate finance.
- The largest banks are responding by deploying their own capital and building repeatable platforms.
- This accelerates the convergence between Wall Street and the alternative asset management complex.
For the market, it likely means:
- More capital chasing direct lending opportunities
- Increased competition on pricing and terms (at least in higher-quality credits)
- Greater attention on liquidity structures and transparency
- A continued “institutionalization” of private credit as a permanent asset class
In other words, Bank of America is not just placing a bet on a hot market. It is acknowledging that the future of lending will be shared between banks, private credit managers, and hybrids of the two—and that the winners will be the institutions that can combine underwriting discipline with scale, distribution, and durable capital.