The tobacco of finance: Bathla’s collapse and the Wild West of private credit

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By improving the regulation of Australian bank lending, the less regulated market of private credit has expanded. It's a global phenomenon. The post The tobacco of finance:…

Every corporate collapse reveals hard truths about weak links in our economy, and the end of Sydney-based property developer Bathla is no different.

This week, ASIC announced it is investigating Bathla, a conglomerate comprising more than 500 companies that went into voluntary administration on August 25, owing creditors a staggering $3.4 billion. But that’s not all: the corporate watchdog is also looking at its long, long list of weird and wonderful private credit lenders and the role they played in the developer’s collapse.

It hasn’t launched a formal investigation into private credit yet, but it looks like it’s about to start cracking heads.

But why in Australia has the realm of private credit — which is volatile and has minimal oversight — seen a meteoric rise over the past decade? Well, finance is like tobacco: we clamped down so hard on the legal market that a Wild West appeared.

The global financial crisis in 2007-08 provides the origin story for private credit. The calamity revealed banks had been taking risks they did not understand, then palming them off onto counterparties who understood them even less. Once the dust settled, a regulatory tidal wave flowed in.

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The new rules had dozens of headings and subsections, dot points and subordinate regulations, but for our purposes two points matter:

As the Reserve Bank wrote in 2014: “The focus of regulation to date has been on global systemically important banks (G-SIBs). Currently, 29 institutions are identified as G-SIBs, for which supervisory intensity has increased and capital surcharges have been set.”

Private credit’s rise isn’t merely an Australian phenomenon, because the new rules were a global effort. In a 2025 analysis of the sector’s ballooning, the Bank for International Settlements argued, “Post-crisis banking regulation likely reduced banks’ willingness to lend to risky firms.

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