Investor types

Banks

Banks reach private markets mainly as lenders and advisers rather than as equity owners. Their principal investments are set by prudential capital rules that charge equity holdings at 250% and venture capital at 400% under the Basel III framework.

What a bank is as a private markets investor

Banks lend to private companies and to private funds through leveraged loans, net asset value (NAV) facilities and subscription lines. They also advise on M&A and capital raising and, within the limits of their capital, make principal equity investments. The defining difference from an asset manager is that a bank invests its own balance sheet, funded largely by deposits and wholesale borrowing, under prudential capital rules, whereas an asset manager invests clients' money as agent.

This places banks on both sides of many private market transactions. A bank may arrange the debt for a buyout, act as M&A adviser to the seller and run a principal investment unit that co-invests alongside sponsors, each activity sitting under separate internal controls and capital allocations. Banks also compete directly with private credit funds and non-bank lenders for the same loans, and their wealth management arms distribute private funds to clients, a role covered on the private banks page.

Scale

The largest banks carry balance sheets measured in trillions. At 31 December 2025 JPMorgan Chase reported total assets of US$4,424,900 million, HSBC US$3,233,034 million and BNP Paribas €2,792,981 million (unaudited).^12,13,14 In the UK, Barclays reported total assets of £1,544.2 billion at the same date, up from £1,518.2 billion a year earlier.¹⁶ In Switzerland, UBS Group reported US$1,617,427 million and Zürcher Kantonalbank, the largest cantonal bank, CHF 206,177 million on a consolidated basis.^15,17

Banks also hold a large share of the investment management industry. Of the 20 largest managers in the Thinking Ahead Institute's ranking of the world's 500 largest asset managers, 12 are independent asset managers, 6 are banks and 2 are insurer-owned managers, with data to the end of 2024.¹ Those 20 managers held US$65.8 trillion, 47.0% of the total for the 500 largest, which reached US$139.9 trillion at the end of 2024.^1,2 In advisory work, JPMorgan ranked first by total investment banking fees in 2025, at US$10.1 billion according to Dealogic data cited by CT Acquisitions.³

Structures and sub-types

Banks active in private markets fall into six broad groups.

Universal banks, which combine deposit taking, corporate lending, investment banking and asset management in one group.
Investment banks, which concentrate on advisory, underwriting, trading and acquisition finance.
Commercial, regional and, in Switzerland, cantonal banks, which provide senior debt and real estate finance to mid-sized domestic companies from their own balance sheets.
Private banks, which serve wealthy families and professional investors and increasingly distribute private funds; see private banks.
Bank-owned corporate venture capital units, which invest in early-stage companies.
Merchant banking units, which make principal equity and mezzanine investments from the bank's own capital.

Some banks also run specialist finance affiliates. Jefferies, for example, describes its finance arm as combining syndicated and direct lending platforms, so that the same platform can underwrite a loan for distribution or hold it as a direct lender.⁴

Source of capital and investment horizon

A bank's capital for private market activity is its own balance sheet, funded by deposits, wholesale borrowing and shareholders' equity. Each exposure consumes regulatory capital according to its risk weight, so the relevant question for a bank is the return on the capital an exposure consumes rather than the return on the amount invested. Lending is typically held for the term of the loan or sold down to other lenders. Principal equity is held for a defined period and is subject to internal limits that reflect its capital cost.

How banks invest in private markets

Most bank activity in private markets is debt and services rather than equity. The main lending products are as follows.

Senior secured term loans and revolving credit facilities provided to companies, including those owned by private equity sponsors.
Acquisition finance for buyouts, either held by a single bank, shared among a small club of lenders or underwritten and then syndicated to institutional loan investors, including collateralised loan obligations.
Subscription lines, which let a fund draw on a bank facility before calling capital from its investors and are secured on investors' unfunded commitments.
NAV facilities secured on a fund's existing portfolio.

Through affiliates or internal units, banks increasingly hold direct loans themselves as well as arranging them for distribution.⁴

Advisory work is the second channel. Banks act as M&A advisers on company sales and acquisitions, as capital markets advisers and, in the case of firms with dedicated teams, as advisers on secondary transactions in private fund interests. Jefferies, which describes itself as the world's sixth largest investment bank, publishes an annual review of the secondary market; its review for 2025 recorded global secondary volume of US$240 billion, up 48% on 2024.^4,5

Principal equity investment is the smallest channel, for the capital reasons set out below.

How lending decisions are made

A bank lending decision normally starts with the coverage or leveraged finance team that originates the transaction and prepares a credit memorandum. The memorandum goes to a credit function that is independent of the deal team, which reviews historical cash flow, the borrower's capacity to service debt, collateral and the effect of stress scenarios, and then approves, amends or declines the proposal. Approval is followed by negotiation of the loan documentation, including the financial covenants and, where several classes of lender are involved, an intercreditor agreement that sets the order of payment and the rights of each lender on default.

Covenants take two main forms. Maintenance covenants are tested at regular intervals, typically each quarter, whereas incurrence covenants are tested only when the borrower takes a specified action, such as raising further debt or paying a dividend.

What banks look for and why they decline

As senior lenders, banks look for stable and predictable cash flow, leverage that leaves headroom against the covenants, adequate interest and fixed charge cover and, where available, tangible collateral. Common reasons for declining a credit are heavy dependence on a small number of customers, volatile earnings, a structurally subordinated position without adequate intercreditor protection and unresolved know-your-customer or anti-money laundering issues. For principal equity, the hurdle is higher still, because each unit of equity carries a much heavier capital charge than a senior loan.

Capital rules and why banks rarely take large equity stakes

The Basel Committee's finalised Basel III framework, published in December 2017, sets a standardised risk weight of 250% for equity holdings and 400% for speculative unlisted equity, which includes venture capital.⁶ A risk weight of 250% means each unit of equity is treated as two and a half units of risk-weighted assets for capital purposes, which makes holding equity expensive compared with senior lending.

Each jurisdiction implements the standard in its own way.

European Union. Under Article 495a of the Capital Requirements Regulation as amended (CRR3), the risk weight for other equity phases in at 100% in 2025, 130% in 2026, 160% in 2027, 190% in 2028, 220% in 2029 and 250% from 2030. For speculative or higher-risk equity the path is 100% in 2025, 160% in 2026, 220% in 2027, 280% in 2028, 340% in 2029 and 400% from 2030.⁷
United Kingdom. The Prudential Regulation Authority's consultation paper CP16/22 of November 2022 proposed a 250% risk weight for equity exposures, with the 400% weight confined to venture capital, phased in over five years under the standardised approach.⁸
United States. The capital rule published in the Federal Register on 11 October 2013 applies a 400% risk weight to equity exposures that are not publicly traded.⁹ Separately, the Volcker Rule, adopted under section 619 of the Dodd-Frank Act, restricts banking entities from short-term proprietary trading and from owning, sponsoring or having certain relationships with hedge funds and private equity funds, referred to in the rule as covered funds.¹⁰

The practical effect is that banks favour senior and secured lending, fee-earning advisory work and minority co-investments over large equity positions.

Trends in 2025 and 2026

Private credit funds now compete with banks for loans to private companies. Bain & Company's midyear private equity report of 8 June 2026 found that debt markets were open and functioning despite what it called private credit jitters, and identified redemption stress in private credit as one of three recent shocks to the industry.¹¹ In the European Union, the CRR3 phase-in raises the capital cost of bank equity holdings each year from 2026 to 2030.⁷ Secondary market activity, in which several banks act as advisers, set a record in 2025.⁵ The balance sheets of the largest banks continued to grow: JPMorgan Chase's total assets rose from US$4,002,814 million at the end of 2024 to US$4,424,900 million at the end of 2025.¹²

Notable examples

Bank	Headquarters	Total assets, with date
JPMorgan Chase	New York	US$4,424,900 million, 31 December 2025¹²
HSBC Holdings	London	US$3,233,034 million, 31 December 2025¹³
BNP Paribas	Paris	€2,792,981 million (unaudited), 31 December 2025¹⁴
UBS Group	Zurich	US$1,617,427 million, 31 December 2025¹⁵
Barclays	London	£1,544.2 billion, 31 December 2025¹⁶
Zürcher Kantonalbank	Zurich	CHF 206,177 million (consolidated), 31 December 2025¹⁷
Jefferies	New York	Describes itself as the world's sixth largest investment bank (2025 Annual Report)⁴

How advisers and placement agents work with banks

Banks are themselves among the most active advisers in private markets, acting for sellers and buyers in M&A and for investors and fund managers in secondary transactions.^4,5 Independent advisers deal with banks chiefly as providers of acquisition finance and fund facilities, as co-advisers on larger transactions and as potential buyers of minority stakes or loan participations. On the debt side, an adviser typically works with a bank's leveraged finance or debt capital markets team: it prepares the financial information, runs a selection among potential lenders, negotiates the term sheet, including margins and covenant headroom, and supports the borrower through documentation. Anglo-Suisse Capital advises on capital raising, M&A and secondary transactions with professional investors.

Frequently asked questions

Why do banks rarely take large equity stakes in private companies?

Under the Basel III framework, equity holdings carry a 250% risk weight and speculative unlisted equity, including venture capital, carries 400%, which makes equity costly in capital terms compared with lending.⁶

When do the new EU equity risk weights take full effect?

Under CRR3 Article 495a the risk weight for other equity rises in steps from 100% in 2025 to 250% from 2030, and for speculative equity from 100% to 400% over the same period.⁷

Is the UK treatment the same as the EU's?

Broadly. The PRA proposed 250% for equity exposures, with the 400% weight applying only to venture capital rather than to all speculative unlisted equity.⁸

Can US banks invest in private equity funds?

Only within limits. The Volcker Rule under section 619 of the Dodd-Frank Act restricts banking entities from owning, sponsoring or having certain relationships with hedge funds and private equity funds.¹⁰

Do banks still finance buyouts?

Yes. Bain & Company reported on 8 June 2026 that debt markets were open and functioning despite private credit jitters.¹¹

What is the difference between a maintenance and an incurrence covenant?

A maintenance covenant is tested at regular intervals, typically each quarter; an incurrence covenant is tested only when the borrower takes a specified action, such as raising further debt or paying a dividend.

How large is the banking sector in asset management?

Six of the 20 largest asset managers in the Thinking Ahead Institute's 2025 ranking, with data to the end of 2024, are banks.¹

Which bank earned the most investment banking fees in 2025?

JPMorgan ranked first, with US$10.1 billion of total investment banking fees in 2025 according to Dealogic data cited by CT Acquisitions.³

Working with Anglo-Suisse Capital

Anglo-Suisse Capital advises companies, fund managers and shareholders on capital raising, M&A and secondary transactions with professional investors in the UK, Switzerland and internationally.

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Sources

This page is general information for professional investors and is not investment advice. Figures are taken from the sources listed, as at the dates stated.