By late 2025, the direction of travel in credit risk is clear.
Across hundreds of conversations with banks, insurers, asset managers, and other non-bank financial institutions, one theme dominates: credit risk management is under sustained pressure — from regulators, capital constraints, and growing portfolio complexity.
Regulatory scrutiny is no longer episodic. Capital is tighter. Private credit and unrated exposures are growing faster than the data needed to support them. Credit risk teams are no longer being asked simply to comply, but to defend judgments, justify capital consumption, and support returns in a far less forgiving environment.
Those best positioned for 2026 are strengthening the evidence behind their decisions now.
Regulatory Scrutiny Is Structural
Regulatory challenge features in almost every client discussion. For banks, IRB models face deeper and more frequent scrutiny, with emphasis on statistical robustness, representativeness, and governance. For insurers and other NBFIs, pressure shows up in stress testing, model transparency, and the defensibility of credit assumptions used in capital and reserving.
The challenge is sharpest where defaults are scarce or exposures are complex. Thin data sets are increasingly questioned, reviews are lengthy, and capital impacts often crystallise late. Looking into 2026, institutions expect more intrusive reviews, greater focus on low-default segments, and a higher risk of conservative overlays or constrained model use. Defensible evidence is now a direct driver of capital outcomes.
Capital Constraints Are Forcing Trade-Offs
Capital pressure is rising across the board. Basel IV is reshaping bank capital consumption, while insurers and reinsurers face heightened sensitivity to credit assumptions, ratings, and concentration risk.
A growing friction point is the gap between economic views of risk and model-driven or regulatory capital outcomes. Risk teams must explain and govern both, while senior management questions whether capital is being deployed efficiently. As constraints tighten, institutions are increasingly benchmarking themselves against peers to assess whether conservatism — justified or not — is eroding competitiveness.
Low-Default and Hard-to-Validate Risks Remain the Weakest Link
Low-default portfolios — including large corporates, banks, funds, NBFIs, project finance, and specialty insurance exposures — remain structurally difficult. Limited defaults undermine statistical confidence, yet these exposures often drive material balance-sheet and investment outcomes.
As challenge intensifies into 2026, the risks are clear: capital inflation via overlays, constrained model usage, and reduced flexibility in pricing, portfolio construction, and risk appetite. Where internal data runs out, comparable external evidence increasingly determines whether outcomes are informed or blunt.
Data Gaps Are a Strategic Constraint
Data availability now shapes what institutions can realistically defend. Clients consistently highlight gaps in emerging markets, mid-market and private counterparties, sector-specific exposures, and complex structures with limited transparency.
Where coverage is robust, decision-making is faster and governance stronger. Where it is not, advanced approaches stall and risk insight is constrained. There is growing recognition that broader, shared data ecosystems are essential to closing these gaps.
Benchmarking Has Become Core Infrastructure
Benchmarking is no longer a validation add-on. It is core governance infrastructure across banks, insurers, reinsurers, and asset managers.
Independent benchmarks are used to validate internal ratings and PDs, identify drift and bias, and support discussions with regulators, rating committees, and senior stakeholders. As scrutiny intensifies, benchmarking is becoming foundational to defending models, capital positions, and risk appetite decisions.
Private Credit and Illiquid Assets Are Exposing New Intelligence Gaps
The rapid growth of private credit is amplifying long-standing intelligence gaps. Many counterparties operate outside public debt markets, making them unrated, opaque, and difficult to monitor. This is increasingly problematic for banks, insurers allocating to private markets, and asset managers running illiquid strategies.
Beyond credit ranking and monitoring, a critical challenge is price discovery. Illiquid assets often do not trade, leaving institutions reliant on stale marks or assumption-driven valuations. Independent credit consensus data can help bridge this gap — providing an objective basis to estimate relative credit quality and implied market pricing, even where no observable trades exist.
As private credit takes a larger share of portfolios by 2026, independent views on unrated and illiquid risk are becoming essential for governance, valuation confidence, and investment decision-making.
Preparing for 2026: Defensibility Over Assumption
Across client conversations, one message is consistent: preparation matters. Leading institutions are strengthening validation ahead of reviews, expanding data contributions, investing in portfolio-level analytics, and using independent benchmarks to support senior and regulatory dialogue.
In an environment defined by tighter capital and tougher scrutiny, success in 2026 will favour institutions that can demonstrate — with objective, credible evidence — that their view of risk stands up to challenge. Independent, data-driven credit intelligence is increasingly central to balancing prudence, performance, and capital efficiency in a volatile world.