Beyond Banks: The $82 Trillion Revolution in Public and Private Credit Markets

Introduction: The Silent Explosion of Credit

In 2023, the private credit market reached an estimated $1.7 trillion—a tenfold increase from its 2009 level (Source: Industry data, Milken Institute). Simultaneously, public debt markets tripled in size to $81 trillion between 2018 and 2024 (Source: [Primary Data] BMO Capital Markets / Milken Institute). Together, these two parallel universes now represent an $82.7 trillion ecosystem that has fundamentally reshaped corporate financing.

This structural shift is not a temporary liquidity event. It reflects a permanent migration of capital away from traditional bank balance sheets toward two distinct but complementary market mechanisms: privately negotiated credit and publicly traded debt. The central question is what forces drove this dual expansion and how companies—from the largest multinationals to middle-market firms—are adapting.

BlackRock projects that private debt as an asset class will double to $3.5 trillion by 2028 (Source: [Primary Data] BlackRock forecast). If accurate, the combined public-private credit market will exceed $85 trillion within three years, making it the dominant architecture for business finance globally.

The Rise of Private Credit: Flexibility Beyond Banks

The tenfold expansion of private credit from approximately $170 billion in 2009 to $1.7 trillion in 2023 is rooted in a regulatory and behavioral pivot. Post-2008 banking reforms—specifically capital adequacy requirements under Basel III—constrained banks' ability to hold corporate loans, especially for riskier or less standardized borrowers. Non-bank lenders, including direct lending funds, business development companies (BDCs), and private credit funds, stepped into the gap.

Private credit offers three structural advantages over traditional bank lending: speed, customization, and relationship depth. A middle-market company seeking financing for a bolt-on acquisition or a turnaround can typically secure a bespoke private credit facility in weeks, compared to months for a syndicated bank loan or public bond issuance. The loan terms—covenants, amortization schedules, collateral structures—are negotiated directly between borrower and lender, allowing for tailored solutions that public markets cannot replicate.

Institutional demand for yield is the supply-side driver. In a prolonged low-interest-rate environment (2009–2021) and subsequent rate normalization (2022–2024), pension funds, insurance companies, and endowments allocated increasing percentages of their portfolios to private credit to capture illiquidity premiums. Private credit funds raised record amounts of dry powder, which they deployed into direct lending, mezzanine debt, and asset-based finance.

Technology played a supporting, not primary, role. Fintech platforms have streamlined origination, underwriting, and due diligence for private credit managers, but the core value proposition remains human judgment and relationship capital. This is especially true in the middle market—companies with $25 million to $500 million in EBITDA—where credit quality cannot be reduced to a credit score.

Public Debt Markets: The Tripling Tide

Public debt markets—comprising corporate bonds, syndicated loans, securitized products, and government securities—reached $81 trillion in 2024, up from $27 trillion in 2018 (Source: [Primary Data] BMO Capital Markets / Milken Institute). This growth was fueled by three interconnected factors: ultra-low interest rates through 2021, a global savings glut that compressed risk premiums, and the expansion of securitization markets that allowed institutional investors to gain exposure to diversified pools of credit risk.

Large corporations with investment-grade ratings are the primary beneficiaries. They access public markets for efficient, scalable funding at lower costs than any private alternative. A $1 billion bond issuance from a blue-chip company can be executed in days with a 50–100 basis point spread over risk-free rates. For these entities, public debt is the default choice for capex financing, refinancing, and working capital.

Smaller and non-investment-grade firms face structural barriers. Public market issuance requires audited financials, ongoing disclosure, and rating agency engagement—costs that can exceed $500,000 per year. Consequently, the public debt market has become a two-tier system: the top tier (large, transparent firms) enjoys deep liquidity and low costs; the bottom tier (smaller, opaque firms) is effectively excluded.

The tripling of public debt also reflects the growth of securitized credit—CLOs, ABS, and MBS—which now account for an estimated $15 trillion of the total. These instruments allow risk to be tranched and distributed, but they also introduce complexity and correlation risk that became evident during the 2008 financial crisis.

Complementary Roles: How Companies Leverage Both Markets

The $1.7 trillion private credit market and the $81 trillion public debt market are not substitutes; they are complements serving different segments of the corporate lifecycle and credit spectrum.

Public debt is optimal when a company needs large-scale, standardized, and transparent financing with predictable pricing. It suits investment-grade corporates, infrastructure projects, and leveraged buyout financing that meets the criteria for syndicated loan or bond markets.

Private credit excels in situations requiring speed, flexibility, and confidentiality: bridge loans for M&A, asset-based revolvers for growth-stage companies, rescue financing for distressed entities, and unitranche loans for middle-market sponsors. The middle market—firms with $10 million to $250 million in revenue—often has no practical access to public markets. For these companies, private credit is not an alternative; it is the only source of non-equity capital.

The relationship between the two markets is dynamic. When public credit conditions tighten (e.g., during rate hikes or volatility), flow shifts to private credit. When public markets re-open, large borrowers return to bonds and loans. This cyclical interdependence means that a company's optimal financing strategy often involves both: a public bond for long-term core funding and a private credit line for strategic flexibility.

BMO Capital Markets provides a case study in how traditional banks are adapting to this new reality. Rather than retreating from the credit space, BMO has formed partnerships with private credit managers Canal Road Group and Oak Hill (Source: [Primary Data] BMO / Milken Institute). These alliances allow BMO to originate and structure private credit for upper-middle-market companies while leveraging the institutional capital of dedicated credit funds. The bank acts as a bridge: it sources deals, performs due diligence, and provides relationship management, while the private credit fund provides the balance sheet capacity. This model enables BMO to serve clients who would otherwise fall between the cracks of public debt and traditional bank lending.

The Only Limit: Imagination

The combined expansion of public and private credit markets has removed one of the oldest constraints on corporate development: access to capital. A company with a viable business plan and credible management can now find financing regardless of size, sector, or credit rating. Private credit covers the gaps that public markets cannot serve; public markets provide scale that private funds cannot match.

Charles Kettering, the inventor and former head of General Motors Research, observed: "Our imagination is the only limit to what we can hope to have in the future." Kevin Sherlock of BMO extended this idea: "Imagination—not access to capital—should be the only limit to a flourishing future for all businesses" (Source: [Primary Data] Milken Institute, 2025 essay).

The data supports their logic. With public debt at $81 trillion and private credit at $1.7 trillion, the global credit system has achieved sufficient breadth and depth to fund almost any non-speculative venture. The challenge is no longer sourcing capital; it is allocating it efficiently and managing the risks inherent in rapid credit expansion.

Looking Forward: Market Predictions

BlackRock's forecast that private debt will double to $3.5 trillion by 2028 implies a compound annual growth rate of approximately 15% from the 2023 base. This trajectory is consistent with continued regulatory pressure on bank lending, sustained institutional appetite for yield, and the secular growth of the middle-market economy.

For public debt, the $81 trillion figure is likely to continue rising, but at a slower pace. The post-2022 rate normalization has increased borrowing costs, which may temper new issuance. However, the large stock of outstanding debt will require refinancing, and global savings will persist, keeping the public market deep.

The critical risk factor is the convergence of private credit with systemic risk. As private credit expands, its illiquidity and opacity become more consequential. A severe downturn could trigger simultaneous demands for capital from private credit fund LPs—who are themselves institutions with their own liquidity needs—creating a potential chain reaction. Regulators are beginning to monitor private credit, but formal oversight remains light.

The most probable outcome: public and private credit will continue to coexist, with the boundary between them blurring as banks form more partnerships like BMO’s with Canal Road Group and Oak Hill. The $82 trillion revolution is not a disruption of banking; it is an evolution of finance into a two-market system that, if managed prudently, can sustain business growth across the entire credit spectrum.