Regulators usually dictate. This time they're asking.

Australia's Securities and Investments Commission could have written new rules for the private credit sector. Instead, they chose something unprecedented: genuine partnership with industry to develop standards collaboratively.

I've been watching this regulatory shift unfold, and it represents a fundamental change in how financial oversight operates in Australia. For CFOs managing capital allocation, real estate investors seeking alternative funding, and lenders navigating regulatory uncertainty, the implications are profound.

The Collaborative Framework Takes Shape

ASIC's approach breaks from tradition. Rather than imposing prescriptive rules, they're working directly with industry participants to identify best practices and establish minimum standards.

The numbers show why this is important. The Reserve Bank of Australia estimates private credit outstanding in Australia at around $40 billion, with rapid growth in recent years and an expanding role in non-bank lending to business, including real estate. Australia's broader private debt market has reached AU$205 billion in 2024, highlighting significant commercial real estate exposure.

This growth created regulatory gaps that directly impact your balance sheet decisions. Traditional oversight mechanisms weren't designed for the complexity and scale of modern private credit markets, particularly in commercial real estate where deal structures vary significantly and due diligence requirements can make or break investment returns.

ASIC Chair Joe Longo made their position clear: ASIC's current work examining private credit sector risks includes thematic surveillance and increased industry scrutiny, with the regulator emphasising collaborative standards development over prescriptive rules.

Three Critical Issues Driving Change

The collaborative approach addresses specific problems that prescriptive regulation might miss.

Terminology standardisation represents the most basic challenge. Without consistent language across the industry, comparing offerings and holding entities accountable becomes nearly impossible. Different firms use different terms for similar products, creating confusion for borrowers and investors alike.

Valuation processes show concerning gaps that threaten portfolio performance. ASIC found funds with no valuation policies in place, leading to embedded stale valuations that will create problems when markets shift. In commercial real estate, where asset values can be complex to determine, this creates systemic risk that could impact your investment returns and regulatory compliance.

Conflict management varies wildly across the sector. While conflicts exist in all businesses, the critical factor is having arrangements to manage them and actually implementing those arrangements in practice. ASIC observed both exemplary and concerning approaches to this fundamental issue.

The Implementation Timeline

ASIC plans to release a short-form interim report in September, followed by a comprehensive paper later this year detailing observed practices across the market. These documents will serve as reference points for industry-wide standard development.

The timeline reflects urgency without panic. Private credit markets continue growing rapidly, with CBRE forecasting that private credit will reach $90 billion in real estate funding by 2029, representing a significant shift in commercial real estate finance dynamics.

This growth trajectory means getting the regulatory framework right matters enormously. Mistakes now compound across a much larger market in just a few years.

What This Means for Your Commercial Real Estate Strategy

The collaborative approach creates opportunities that traditional regulation might have stifled, with direct implications for your investment and lending decisions.

Standardised terminology will reduce transaction costs and speed up deal evaluation. For CFOs managing multiple funding sources, this means clearer comparisons between providers and more efficient capital allocation decisions. Currently, the lack of consistent language creates unnecessary friction that adds weeks to deal timelines.

Improved valuation practices should reduce pricing uncertainty and create more reliable benchmarks for both lenders and borrowers. This particularly benefits complex commercial real estate transactions where asset valuation drives deal structure and determines loan-to-value ratios that impact your cost of capital.

Better conflict management frameworks will increase investor confidence in private credit vehicles, potentially expanding the pool of available capital for commercial real estate projects. This could drive down funding costs as more institutional capital enters the market.

The regulatory approach also recognises that private credit serves as a "pressure valve" for the banking system, providing financing for sectors like commercial real estate that may face challenges accessing traditional bank lending under tightening prudential requirements.

Industry Response and Next Steps

The private credit industry has shown willingness to engage constructively with ASIC's collaborative approach. This cooperation suggests the framework has a realistic chance of success, unlike top-down regulatory initiatives that often face resistance.

Key areas for standardisation include rigorous due diligence processes, regular independent asset valuations, transparent investor reporting, strong governance frameworks with external oversight, and full disclosure of operations, fees, and performance.

The approach leverages international standards and benchmarks, particularly around governance, valuations, and liquidity management. This creates consistency with global best practices while addressing Australia-specific market conditions - crucial for institutional investors with global mandates who need consistent reporting standards across jurisdictions.

The Bigger Picture

This regulatory evolution reflects recognition that private markets have become "an important part of our economy" and need appropriate frameworks to succeed sustainably.

The collaborative approach acknowledges that effective regulation requires deep industry knowledge and practical understanding of market dynamics. Prescriptive rules written without this context often create unintended consequences or miss critical issues entirely.

For commercial real estate professionals, this represents an opportunity to help shape the regulatory environment rather than simply adapt to imposed rules. The quality of industry engagement will directly influence the effectiveness of resulting standards.

The ultimate goal extends beyond compliance. ASIC's approach aims to create a framework that supports sustainable growth in private credit markets while protecting investors and maintaining market integrity. For senior executives, this collaborative window won't stay open indefinitely. Early engagement in the standards development process could influence regulations that affect your funding options for years to come. The alternative is adapting to standards developed without your input.

Success here could establish a model for regulatory development in other rapidly evolving financial sectors. The collaborative approach represents a pragmatic recognition that modern financial markets require sophisticated, nuanced oversight that traditional regulatory methods struggle to provide.

The commercial real estate financing landscape is evolving rapidly. How well industry participants engage with this collaborative regulatory process will significantly influence the framework within which they operate for years to come.

References

1. Reserve Bank of Australia. (2024). "Growth in Global Private Credit." https://www.rba.gov.au/publications/bulletin/2024/oct/growth-in-global-private-credit.html

2. Alvarez & Marsal. (2024). "Australian Private Debt Market Review 2024: New Record Market Size AU$205bn and Impacts." https://www.alvarezandmarsal.com/insights/australian-private-debt-market-review-2024-new-record-market-size-au205bn-and-impacts

3. Australian Securities and Investments Commission. (2025). "The Future of Australia's Public and Private Markets: ASIC Shares Industry Feedback and Next Steps." https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2025-releases/25-094mr-the-future-of-australia-s-public-and-private-markets-asic-shares-industry-feedback-and-next-steps/

4. Property Buzz. (2025). "Private Credit Tipped to Play $90bn Role in Australian Real Estate Funding by 2029." https://propertybuzz.com.au/2025/06/12/private-credit-tipped-to-play-90bn-role-in-australian-real-estate-funding-by-2029/

5. EY. (2024). "Australian Private Debt Update." https://investmentcouncil.com.au/common/Uploaded%20files/Special%20Reports/EY_2024_Australian_Private_Debt_Update.pdf