European corporate finance is entering a structural transition. For decades, most companies in continental Europe relied primarily on banks for working capital, investment loans, acquisition finance and real estate financing. That model is not disappearing, but it is changing.
The finalization of the Basel III framework — often referred to in the market as Basel IV — is one of the drivers of that change. The new rules are designed to make banks safer, more comparable and more resilient. But they also affect the economics of lending. If certain loans require more regulatory capital, banks will either price them higher, standardize them further, reduce appetite for them, or leave more room for alternative lenders.
This is where private credit and other forms of non-bank financing enter the debate. The central question for Belgium is therefore not whether Basel IV is good or bad. The more relevant question is this:
If banks become more selective and non-bank lenders gain market share, will that increase financing costs for Belgian companies and reduce their investment capacity?
The answer is nuanced. The underlying concern is valid, but the conclusion should not be overstated. Private credit can increase the cost of debt for some borrowers. At the same time, it can also create financing capacity where bank financing would otherwise not be available.
The European implementation of the final Basel III reforms is embedded in Regulation (EU) 2024/1623, commonly known as CRR3. This regulation amends the existing Capital Requirements Regulation in relation to credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor.
The most important conceptual change is the output floor. The output floor limits how much benefit banks can obtain from internal risk models compared with the standardized approach. Under the EU text, the output floor sets a lower limit on internal-model capital requirements equal to 72.5% of the own funds requirements that would apply under the standardized approaches.
For banks, however, this has a direct commercial consequence. Lending is not only a credit decision. It is also a capital allocation decision. If a loan consumes more regulatory capital, the bank needs a higher return on that loan. That does not mean banks will stop lending. It does mean they will increasingly prefer loans that are standardized, collateralized, easier to rate, easier to monitor and easier to fit within their risk-weighted asset optimization.
The practical effect of Basel IV is not that all lending becomes more expensive overnight. The effect is more selective and more granular.
Banks are likely to remain highly competitive in areas where they have scale, strong collateral and predictable risk metrics. This includes prime residential mortgages, plain vanilla SME lending, strong-collateral investment loans, and relationship-driven lending to established companies.
However, banks are likely to become more selective in areas such as acquisition finance, leveraged lending, special situations, real estate development, subordinated debt, growth financing, lending to unrated corporates, and transactions that do not fit standard product boxes.
This is especially relevant in Europe because corporate financing is still significantly bank-based. The ECB’s sectoral data show that other financial institutions are already important providers of loans to non-financial corporations in the euro area.
The rise of private credit is one of the most important global financial market developments of the past decade.
This growth is not accidental. Private credit has expanded because it offers borrowers features that banks are often less able or less willing to provide:
🔹 speed of execution;
🔹 flexible structures;
🔹 certainty of funding;
🔹 tailored amortisation;
🔹 higher leverage;
🔹 willingness to finance complexity;
🔹 appetite for borrowers that are too small for public debt markets but too complex or too leveraged for traditional bank financing.
The IMF describes private credit as a financing source for companies that are “too large or risky for commercial banks and too small to raise debt in public markets.” [imf.org]
That is precisely the space where many mid-market companies operate.
The Netherlands is a useful comparison for Belgium because it is close geographically, has a sophisticated financial market and has experienced the transition towards non-bank lending earlier and more visibly.
The Benelux region has become the fourth largest private credit market in Europe, after the UK, France and Germany.
One particularly striking data point is that private credit now reportedly accounts for around 80% of the Dutch leveraged finance market.
This does not mean that Dutch banks have disappeared from corporate lending. They remain important providers of traditional credit. But private credit has become a mainstream financing solution for transaction-driven, leveraged and complex mid-market financing.
The lesson for Belgium is clear: once private credit gains scale and familiarity, it can move quickly from niche to mainstream in specific market segments.
France offers another relevant comparison. It remains a relatively bank-driven economy, but private debt has become an established part of the corporate finance toolkit.
France remains one of the most active private debt markets in Europe, holding a solid second position behind the United Kingdom.
This is relevant because France, like Belgium, has historically relied heavily on bank finance. Yet private debt has not replaced the banking system. It has become an alternative and complementary source of funding, especially in situations where borrowers require flexibility, certainty or higher leverage.
The French example therefore supports a nuanced conclusion: private debt can grow in a bank-based economy without necessarily undermining the banking system.
Belgium remains a bank-centred financing market.
Data reported by the National Bank of Belgium show that outstanding loans from Belgian credit institutions to (non-financial) corporations amounted to EUR 158.0 billion in January 2026. This was the highest level ever.
The Belgian banking sector also remains well capitalized, so Belgium is not currently facing a reduction in bank lending. The question is whether certain categories of borrowers and transactions will gradually migrate away from banks because they no longer fit the increasingly standardized bank credit model.
Private credit is generally more expensive than bank financing. This is not a temporary anomaly; it is structural.
Banks fund themselves partly through deposits and operate with a diversified balance sheet. Private credit funds, by contrast, raise capital from institutional investors such as pension funds, insurers, sovereign wealth funds, family offices and asset managers. Those investors expect a return that compensates them for illiquidity, credit risk and complexity.
Institutional investors have invested in private credit funds because they offer higher returns and less volatility, although the market is less transparent than public credit markets.
The economic logic is simple:
🔹 bank debt is usually cheaper but less flexible;
🔹 private credit is more expensive but more flexible;
🔹 mezzanine or subordinated debt is even more expensive but can support higher leverage or fill funding gaps.
For a borrower, the relevant question is not only “what is the cheapest source of funding?” The better question is: “what financing structure allows the company to execute its plan at an acceptable risk-adjusted cost?”
That distinction matters. A company that can borrow from a bank at 4% should normally not borrow from a direct lender at 8% or 10% unless there is a compelling structural reason. But if the bank is only willing to provide part of the required funding, or imposes constraints that make the transaction impossible, then private credit may be economically rational despite the higher cost.
The concern that more non-bank financing may reduce corporate investment capacity is legitimate.
If Belgian companies replace cheap bank funding with more expensive private debt, their average cost of capital increases. A higher cost of capital means fewer investment projects pass the required return threshold. This can reduce capital expenditure, acquisition capacity and long-term competitiveness.
However, the effect should not be presented too simplistically.
Private credit may reduce investment capacity if it replaces cheaper bank funding. But it may increase investment capacity if it provides funding that banks would not have offered at all.
This is the central distinction.
In a scenario where private credit is a substitute for bank debt. Then financing costs will increase and will reduce investment appetite.
In a scenario where private credit is additional financing capacity. Then it can support growth, acquisitions, restructuring and investment projects that would otherwise not happen.
Private credit creates economic benefits by providing long-term financing to corporate borrowers, while the migration of credit from banks and public markets to private credit creates transparency and financial stability risks.
The rise of private credit is not risk-free.
Private credit markets are less transparent than bank lending and public debt markets. Private credit borrowers tend to be smaller, more indebted and more vulnerable to rising interest rates and economic downturns.
There are several vulnerabilities in private credit, including infrequent valuation, possible stale pricing, hidden leverage, interconnectedness between funds, private equity sponsors, banks and institutional investors, and limited data availability for supervisors.
This matters for Belgium. If credit creation increasingly migrates outside the regulated banking sector, supervisors will need better data on the size, leverage, concentration and interconnectedness of non-bank lending markets.
Belgium currently appears less exposed than larger markets. The 2025 Belgian Financial Stability Report summary states that the Belgian non-bank financial intermediation sector is significantly smaller than in other advanced economies: 29% of GDP in Belgium versus 98% of GDP in other advanced economies. That suggests Belgium has room for further non-bank finance development.
For Belgian entrepreneurs, CFOs and shareholders, the key takeaway is practical.
The financing market will become more segmented.
A strong borrower with predictable cash flows, good collateral and modest leverage will still be able to obtain attractive bank financing. A borrower seeking acquisition leverage, growth capital, refinancing flexibility, shareholder liquidity or complex structuring may increasingly need to combine bank debt with non-bank debt.
This means that Belgian companies should become more professional in how they approach funding. They should not simply ask one or two relationship banks for a proposal.
As the market becomes more complex, financing advice becomes more valuable. The question is no longer simply whether a company can obtain funding. The question is whether it can obtain the right funding mix at the right cost, with the right flexibility and the right execution certainty.
1. CRR3 / Basel IV entered into force in the EU on 1 January 2025. [eba.europa.eu]
2. The EU output floor limits internal-model capital requirements to no less than 72.5% of the amount that would apply under standardised approaches. [eur-lex.europa.eu]
3. Global private credit topped USD 2.1 trillion in assets and committed capital in 2023, according to the IMF. [imf.org]
4. Approximately three-quarters of global private credit was in the United States, according to the IMF. [imf.org]
5. EY / ACC / AIMA research estimates the broader global private credit market at more than USD 3 trillion. [ey.com]
6. Private credit deployment increased from USD 203 billion in 2022 to USD 333 billion in 2023, according to EY / ACC / AIMA research. [ey.com]
7. Other financial institutions were creditors of 23% of euro area loans to non-financial corporations by the financial sector in Q2 2024. [banque-france.fr]
8. Belgian credit institutions had EUR 158.0 billion of outstanding loans to non-financial corporations in January 2026. [ceicdata.com]
9. Belgian banks had an LCR of 155%, NSFR of 129%, capital ratio of 15% and total capital ratio of 19% at the end of 2024. [financialforum.be]
10. The Belgian NBFI sector represented 29% of GDP under the FSB narrow measure, compared with 98% of GDP in other advanced economies. [financialforum.be]
11. French private debt funds raised EUR 8.5 billion in 2024 and invested EUR 12.8 billion across 317 transactions. [franceinvest.eu]
12. France remains one of the most active private debt markets in Europe, holding a solid second position behind the United Kingdom. [franceinvest.eu]
