Credit in Transition: Consumer, Corporate & Private

This article distills a recent LinkedIn Live event hosted by Marvin Labs. The session featured Alex Hoffmann (Founder and CEO, Marvin Labs) and Muntaha Islam (Head, Loughborough Student Managed Fund; founder, Find Your Place in Finance).

The discussion examined how higher-for-longer rates, fintech models such as Buy Now, Pay Later (BNPL), the institutionalization of private credit, and the Basel IV capital framework are reshaping the structure, flow, and pricing of credit. These shifts matter for analysts because they alter where risk resides, how it is underwritten, and how credit availability feeds into earnings quality across sectors.

Watch the full video below for the complete conversation.

The higher-for-longer backdrop is repricing credit risk

The panel opened with the macro setting: policy rates staying higher for longer have raised the cost of capital and tightened lending standards. In the US, the Federal Reserve’s Senior Loan Officer Opinion Survey shows banks have kept standards tight across business and consumer credit, while demand has weakened at the margin. That combination pushes more borrowers to nonbank channels and private markets, shifts underwriting approaches, and influences credit availability across sectors. For market context, the ICE BofA US High Yield OAS has stayed elevated versus pre-2022 levels, underscoring a higher cost of risk-bearing.

• Tightening standards: see the Federal Reserve’s Senior Loan Officer Opinion Survey SLOOS.
• Risk premium context: ICE BofA US High Yield OAS via FRED.

For equity and credit analysts, the implication is straightforward: embed a structurally higher discount rate and coupon into models and revisit sensitivity to spread volatility, especially for levered or refinancing-dependent names.

Consumer credit: BNPL growth, underwriting frictions, and regulation

The conversation highlighted how BNPL platforms such as Klarna have broadened consumer access to short-duration credit, yet with different underwriting, repayment, and disclosure practices than traditional cards. Regulatory scrutiny has been rising on both sides of the Atlantic. The CFPB’s research documents the scale and usage patterns of BNPL and calls out data, dispute, and late-fee practices as areas to watch. In the UK, the FCA’s Woolard Review laid groundwork for bringing BNPL into the regulatory perimeter.

• US perspective: CFPB’s BNPL market review report.
• UK perspective: FCA’s Woolard Review on change and innovation in unsecured credit review.

Takeaways for coverage:

• Credit performance: Track delinquency and charge-off trends in BNPL and adjacent consumer lenders, with attention to cohort vintages and re-aging practices. Differences in loss recognition timing versus banks can matter for quarter-to-quarter volatility.
• Funding and liquidity: Monitor warehouse lines, ABS issuance windows, and the cost of forward flow agreements. Funding fragility can drive sudden changes in origination pace and marketing spend.
• Data and underwriting: AI/ML-driven underwriting can expand approval rates but raises explainability and adverse-action compliance questions. The CFPB has reminded lenders that ECOA adverse-action notice requirements apply regardless of algorithmic complexity, which affects documentation and model governance in consumer credit.

Corporate credit and the rise of private lenders

With banks facing capital and liquidity constraints, private credit funds have scaled as direct lenders to middle-market and increasingly upper-mid/large borrowers. This migration has consequences for pricing power, covenants, and workout dynamics. Global bodies have flagged the need to monitor leverage, documentation, and liquidity in private credit structures.

• Systemic lens: BIS analysis on private credit’s growth and risk channels overview and the IMF’s Global Financial Stability Report coverage of private credit chapter.

What to watch in models:

• Repricing: Private loans have reset at higher spreads and base rates. Update interest coverage and cash interest assumptions for sponsor-backed issuers, and revisit downside cases for sectors with cyclical EBITDA.
• Documentation: Covenant-lite and EBITDA addbacks affect early-warning power. Analysts should assess real covenant headroom and the credibility of adjustments in underwriting cases.
• Refinancing walls: Ladder out maturities and identify borrowers reliant on amend-and-extend. Elevated cash interest and tighter lender consortia can pull forward restructuring risk.

Basel IV pressure on bank balance sheets

Basel IV (industry shorthand for the finalization of Basel III reforms) introduces changes such as the 72.5% output floor on risk-weighted assets, revised standardized approaches, and adjustments to internal models. Implementation is staged across jurisdictions through the late 2020s. The direction of travel is clear: certain portfolios become more capital-intensive, which can reduce bank appetite for specific risk types and push exposures into nonbank channels.

• Framework: Basel Committee’s finalization of post-crisis reforms document.
• US path: Federal Reserve’s proposed “Basel III endgame” package announcement.

For equity analysts, this argues for re-segmenting bank exposure maps by capital intensity and RWA inflation under the output floor. For cross-coverage, it also frames who fills the lending gap, at what price, and with what recourse.

AI in underwriting: speed gains with governance requirements

The panel touched on AI-enabled underwriting and document processing. The near-term utility is operational: faster income verification, better document classification, and triage for exception handling. The risk is governance. Supervisors have emphasized that using complex models does not alter obligations around explainability, adverse action, and fair lending. That creates a baseline need for model documentation, challenger models, and clear reason codes for declines or pricing.

• Compliance context: CFPB guidance on adverse-action notice obligations for complex algorithms guidance.

Tariffs, inflation pass-through, and credit sensitivity

Policy-driven tariff changes can alter input costs and pricing power, which feed into margins, working capital, and debt service. The latest Section 301 review increased tariff rates in targeted sectors like EVs, batteries, and solar components. Academic and central bank research on prior tariff rounds found material pass-through to domestic prices, though effects vary by product and supply-chain flexibility.

• Policy reference: USTR’s 2024 Section 301 review announcement.
• Price effects: Evidence on tariff pass-through from Amiti, Redding, and Weinstein study.

Marvin Labs has released a free tool to surface tariff disclosures in primary documents so analysts can quickly map potential revenue and margin exposure.

For coverage work, incorporate tariff scenarios in sensitivity analysis for import-dependent names, transition the effects into gross margin and opex, and reflect knock-on impacts on cash interest coverage and covenants.

Why This Matters for Analysts

Conclusion: The tools and data exist to quantify these shifts, but the dispersion in underwriting standards and funding models requires more cross-sector work. Watch the full video to hear the complete discussion and perspectives from the session.