Pimco criticizes lax private credit checks, warns market is facing a "big reckoning".

Pacific Investment Management Company stated that the increasing pressure in the private credit market is a result of lax loan underwriting standards over the years. The president of the company, Christian Stracke, said, "This is not just a confidence crisis, but an extremely bad underwriting crisis." The $1.8 trillion private credit market is witnessing investors withdrawing. Previously, the collapse of some high-profile companies has raised concerns about loan quality, especially regarding software companies at risk due to the rapid development of artificial intelligence threatening their business models. Stracke said that this squeeze could lead to default rates staying in the mid-single digits in the coming years, and investors' returns could decrease from around 10% to around 6%. However, he also added that he does not foresee a broader credit crisis. However, due to a lack of transparency in this field, when some loan values are marked down to zero, some investors may be "eager to assume that all other assets are equally bad."