Australia’s Private Credit Reckoning: How Regulators Are Redefining What “Good” Looks Like
Australia’s private debt market is undergoing a quiet revolution. Once a niche segment of the financial landscape, it has now emerged as a central pillar of capital deployment, with assets under management reaching an impressive A$224 billion in 2025.
While compared to the US and European markets, Australia’s private debt market is still relatively small. However, this is slowly changing. With this growing emergence, a broader range of investors are now investing in the asset class, and the Australian Securities and Investment Commission (“ASIC”) is taking note. ASIC’s recent publications, including ASIC 814, published in September 2025, reflect this expanded focus. ASIC 814 raises expectations around governance, transparency, and post-close discipline. Quarterly reporting and static processes are not sufficient; lenders need continuous visibility and evidence across the full life of a loan.
Where ASIC Is Focusing: Five Themes Shaping the Next Phase
1. Valuations Are Moving From Periodic Estimates to Ongoing Evidence
ASIC’s 814 report has highlighted that valuation practices and portfolio disclosures remain inconsistent.
- Static or story-driven valuations are no longer credible in isolation
- Forward-looking valuation depends on borrower-level performance data
- This is especially important for bespoke lower middle-market deals (”LMM”), asset-backed lending, and capitalised-interest structures
The underlying message is clear: valuations must be anchored in what borrowers are actually doing, not just what was assumed during underwriting.
2. Liquidity Is About the Quality of Cashflow
ASIC has drawn attention to situations where loans appear healthy, but the cash supporting them is fragile.
- Interest may be serviced without being supported by sustainable operating cashflow
- Add-backs can obscure underlying performance if not monitored carefully
- LMM borrowers are particularly exposed to margin pressure and refinancing risk
Per ASIC’s guidance, borrower health is better determined by sustainable business performance, and not whether debt service payments are being made today.
3. Credit Risk Management Must Be Continuous
ASIC has been explicit that credit risk does not end at origination.
- Covenants are expected to be monitored, tested, and acted on
- Risk assessments should evolve as borrower performance evolves
- At-risk exposures should be identified early and tracked deliberately
This represents a move away from episodic reviews toward ongoing credit stewardship.
4. Asset-Backed Lending Requires Stronger Oversight
As structured and asset-backed strategies grow, ASIC is raising expectations.
- Borrowing base monitoring must be more than static certificates
- Collateral quality and concentration require ongoing visibility
- Volatile environments demand trend analysis, not point-in-time checks
This is especially relevant as private credit expands into more operationally intensive structures.
5. Best Practice Governance Is Systems-Based
Perhaps the most important shift is ASIC’s view on governance.
- Trust and confidence depend on conduct and performance, not reputation
- Consistent terminology and repeatable processes matter
- Evidence is replacing narrative as the foundation of credibility
ASIC is converging on the idea that systems and data are now core governance tools.
Turning ASIC Expectations Into Practice
The themes across ASIC’s reports point in the same direction: private credit must move from quarterly hindsight to continuous insight. This shift requires better data, clearer processes, and tools designed for life after close.
Below is how CovenantIQ’s perspective and platform align with the regulatory themes ASIC is emphasising.
From Scrutiny to Strength
ASIC’s scrutiny is not a constraint on private credit’s future. It is a framework for earning trust at scale. The lenders who succeed in this next phase will be those who treat monitoring, transparency, and governance as everyday disciplines, not periodic obligations.
Private credit has earned its place in Australia’s financial system. Now it is being asked to operate like it belongs there.
