When Banks’ Underwriting Expertise Moves Beyond Their Own Balance Sheets

Private credit, regional banks, and the changing architecture of financial intermediation in Japan

“Replacing Banks” Is Only Half the Story

The role of global asset managers is changing significantly. Major firms such as BlackRock, Blackstone, and KKR are no longer focused only on listed equities and bonds. Their activities increasingly extend to private credit, asset-based finance, infrastructure, real estate, insurance, and other areas in which capital is supplied directly to companies and projects.

The Financial Stability Board estimates that the global private credit market reached between USD 1.5 trillion and USD 2 trillion at the end of 2024. Blackstone, meanwhile, reported USD 547 billion in assets under management across its combined Credit & Insurance and Real Estate Debt businesses as of June 30, 2026.

It is therefore tempting to say that asset managers are beginning to replace banks. As capital and liquidity requirements tighten and pressure to improve capital efficiency grows , the economics of holding every credit exposure on a bank’s own balance sheet are increasingly being questioned.

But describing the change simply as a transfer of lending from banks to asset managers captures only half of what is happening.

Banks have traditionally integrated multiple functions within a single balance sheet: sourcing borrowers and projects, underwriting credit, structuring financing terms, providing funds, holding risk, and monitoring borrowers. What is changing is that these functions are becoming unbundled and distributed across banks, asset managers, insurers, and institutional investors.

Banks are not disappearing. Rather, functions that were once bundled together inside bank balance sheets are being separated, and some are becoming directly connected with third-party capital.

Financial Intermediation Is Unbundling, Not Disappearing

The relationship between banks and private credit funds illustrates this structural change.

Private credit is often described as financing provided directly to companies without going through banks. In practice, however, the relationship is more complex. The FSB reports that available member data captures approximately USD 220 billion of drawn and undrawn credit lines from banks to private credit funds.

Banks may step back from directly holding certain loans while continuing to participate through fund financing, origination relationships, payment services, risk transfer, and other forms of intermediation.

This is therefore not simply a competition between banks and asset managers. It is better understood as the unbundling and reallocation of financial-intermediation functions across origination, underwriting, funding, risk holding, and monitoring. Nor is this simply a story of risk migrating from banks to nonbanks. The ultimate holders of risk may be changing, but the interconnections between banks and nonbank financial intermediaries are, if anything, becoming deeper.

Nor has the underlying source of value in financial intermediation fundamentally changed. The ability to find opportunities, assess businesses, structure transactions, and monitor risk has always been central to banking.

What is changing is whose capital those capabilities are put to work with—and how institutions monetize them. 

In the traditional banking model, banks principally fund lending with deposits and hold credit risk on their own balance sheets, earning primarily the spread between lending and funding costs. In an asset-management model, similar sourcing and underwriting capabilities can be used to allocate third-party investment capital to companies and projects, with the manager earning management and related fees.

In other words, what is changing is whose capital sits behind the intermediary’s judgment. 

Bank Underwriting and Investment Management Are Not the Same

Changing the source of capital also changes the standard by which opportunities must be assessed.

A bank making a loan may consider creditworthiness, collateral, the broader banking relationship, asset-liability management, and its own capital position. An asset manager investing third-party capital must also compare the opportunity with alternative investments, determine whether expected returns compensate for risk, assess concentration and liquidity, and explain the investment case to investors.

Bank underwriting expertise therefore cannot simply be transplanted into a fund.

The additional capability required is the ability to translate “a deal the bank knows well” into “an asset that can stand on its own merits for third-party investors.” 

Only then can the information-production capabilities accumulated by banks become an investment-management capability capable of mobilizing third-party capital.

A Regional Bank’s Real Asset Is More Than Its Balance Sheet 

This perspective also changes how we might think about the future of regional finance in Japan.

Regional banks have traditionally collected deposits within their communities and supplied capital to local companies and development projects through their own balance sheets. But is balance-sheet size really their most important competitive asset?

I would argue that substantial value lies elsewhere: in information about local companies accumulated through long-term relationships, relationships with business owners, networks that identify succession needs, capital expenditure, and new projects at an early stage, and the ability to monitor companies after financing is provided.

In asset-management terminology, these are potentially powerful sourcing and information-production capabilities.

Proximity, however, has two sides. It can create informational advantages, but it can also create bias. Long relationships may provide information unavailable to outsiders, while those same relationships may make it harder to walk away from a deal.

Unless this tension is properly managed, a regional bank’s strengths cannot simply be converted into investment-management capabilities.

From Regional Knowledge to Investable Assets

One possible next stage for regional banking groups may therefore be to use affiliated asset managers and investment vehicles, potentially including PEITs—investment corporations targeting unlisted shares and other private assets—to allocate capital from investors inside and outside the region to local companies and projects.

A bank balance sheet or public-sector financing could still be used during the early project-development stage. Once a business matures to the point where its cash flows and risks can be explained to investors, it could potentially be connected to longer-term capital through a PEIT or another vehicle, allowing early-stage capital to be recycled into subsequent projects.

The objective is not simply to add another financing instrument. It is to create a capital cycle: project formation, improvement in investability, connection to long-term capital, and reinvestment of early-stage capital.

A listed PEIT may, to some extent, decouple the investment horizon of the underlying assets from the holding horizon of individual investors. Investors may be able to transfer their investment units in the market without requiring the PEIT itself to sell the underlying asset each time.

Listing does not, of course, create liquidity by itself. But this partial separation between the life of the underlying asset and the investor’s holding period can be important when connecting long-duration regional assets with capital markets. 

This discussion is also consistent with the direction of Japan’s 2026 economic and financial policy. The government’s July 2026 Financial Services Strategy to Promote Growth Investment – Upgrading “Promoting Japan as a Leading Asset Management Center”  includes measures intended to strengthen the financing and growth-support functions of financial institutions, encourage the use of third-party investor capital through funds operated by banking groups, and strengthen regional financial capabilities.

The government can improve the conditions that make strategically important projects more investable through subsidies, guarantees, subordinated capital, tax measures, regulatory reform, and other tools. But deciding whether a particular opportunity is genuinely investable remains a private-sector function.

That distinction is essential. A project can be important from a policy perspective without being attractive as an investment.

Someone must analyze cash flows, allocate risks to appropriate parties, establish governance, determine value, and turn information into a form investors can evaluate.

In that sense, financial intermediation must translate the language of policy and regional opportunity into investable assets.

A sustainable structure would keep the roles distinct: government improves investability; regional banks source opportunities; asset managers make independent investment decisions; and vehicles such as PEITs connect suitable assets with capital markets.

That separation is particularly important where a bank and asset manager belong to the same financial group. Moving loans originated by a bank into an affiliated manager’s fund without independent judgment could simply transfer risks the bank no longer wishes to hold to outside investors.

Independent investment decisions, appropriate valuation, and effective conflict-of-interest management are indispensable.

Regional specialization itself also creates concentration risk from an investor’s perspective, and listing a PEIT would not by itself guarantee fundraising or market liquidity.

In finance, creating a new “box” is usually easier than deciding what should go into it, who should select those assets, who should bear responsibility for those decisions, and how those assets should be valued.

Building a Leading Asset-Management Center Also Means Rebuilding Financial Intermediation 

Seen from this perspective, Japan’s ambition to become a leading asset management center should be understood more broadly.

NISA, high-quality low-cost investment products, and financial education are all important. But they primarily address the entry point of the capital cycle.

The more difficult question comes next: who will allocate capital gathered from households, pension funds, insurers, and overseas investors to companies, infrastructure, and regional growth projects, and on what information and discipline will those decisions be based?

And how will the resulting returns flow back to investors and then into the next round of investment?

Moving households from savings to investment does not by itself improve capital allocation. Without financial intermediaries capable of converting promising projects into investable assets, the result may simply be a change in where household financial assets are held.

For that reason, assets under management in investment trusts and other vehicles should not be the only measure of success for Japan’s asset-management policy.

Another important measure is how many effective channels can be built outside bank balance sheets to deliver risk capital to the real economy, recover that capital, and reinvest it—and how deeply market discipline and fiduciary responsibility can be embedded in those channels.

Only then can the asset-management industry become part of Japan’s infrastructure for capital allocation.

At JAMP, our ambition is not limited to providing the operating infrastructure needed to structure and operate vehicles such as PEITs, ETFs, and investment trusts. In several regions, we have been exchanging views with regional financial institutions and other market participants on new models of capital allocation and recycling involving PEITs. In the case of PEITs, we want to go beyond providing white-label operating infrastructure and help design and implement the broader regional capital-allocation architecture itself—including how responsibilities and economics should be allocated among participants.

Those discussions reinforce one point: the most difficult questions are often found before and after the vehicle itself.

Those discussions reinforce one point: the most difficult questions are often found before and after the vehicle itself.

Who sources the opportunities? Who makes the investment decision? Who values and monitors the assets? Which investors should receive them? And how should responsibility and economic compensation be allocated among those parties?

The structural change taking place globally is not one in which asset managers simply displace banks. It is one in which financial-intermediation functions once vertically integrated inside banks are being unbundled and reassigned to the parties best suited to perform them.

Bank credit judgment is not becoming obsolete. The question is whether that judgment can eventually mobilize not only a bank’s own balance sheet, but third-party capital as well.

If so, the core of Japan’s asset-management ambitions may ultimately be less about increasing assets under management than about rebuilding the architecture of financial intermediation: who selects which opportunities, whose capital they deploy, and how they are held accountable for the outcome.

The capability Japan’s asset-management industry will increasingly need is not simply the ability to gather capital, but the ability to find good opportunities, select them rigorously, connect them with capital capable of bearing the appropriate risks, and return the resulting value to the next cycle of investment.

Author: Keiichi Ohara, President & CEO, JAMP Corporation
About This Article
This article is an adapted English edition of JAMP Perspective No. 346, originally written in Japanese by Keiichi Ohara and distributed on August 19. It has been edited and supplemented where necessary to make the discussion and its Japan-specific context clearer to readers outside Japan. It is therefore not a direct translation of the original Japanese newsletter.
This article is provided for informational purposes only and does not constitute investment advice or a recommendation regarding any financial product.