Citi is teaming up with Apollo for a $25 billion private loan program

Citigroup c and Apollo Global APO have come together for a $25 billion personal loan program. This reflects a growing alliance between banks and non-banks that want to get a piece of the precious $2 trillion market (link).

Abu Dhabi sovereign wealth fund Mubadala Investment Company and pension and retirement services unit Apollo Athene will also participate in the program, the companies said on Thursday.

Private loans are loans from non-banks like Apollo, which are not subject to the same rules as banks. Such loans are usually given to high-risk borrowers or to companies that want to get money for a big construction with debt capital.

These loans can be processed more quickly and are an important source of funding for borrowers who are considered too vulnerable by traditional banks.

Although they were initially seen as a threat to banks, in recent months (link) (link) (link) private lending companies have partnered (link) with traditional lenders. This makes it easier for banks to find customers and collect fees without putting their own capital at risk.

In January, Citi (link) launched another private credit vehicle in collaboration with fellow investment manager LuminArx Capital.

“Combining the strength of Citi’s banking and capital markets business with Apollo’s extensive capital resources will provide clients with a range of options to meet their growing financial needs,” said Viswas Raghavan, head of Citi’s banking business , in a statement.

The program will initially focus on North America, but could later expand to other regions and go beyond the $25 billion target, the companies said.

“The partnership is another example of private credit’s rapid growth in mainstream financing,” said Ana Arsov, Global Head of Private Credit at Moody’s Ratings.

Last week, Apollo received a commitment from BNP Paribas BNP of $5 billion (link) to expand its private credit business.

An International Monetary Fund report published in April said that the private lending market should be scrutinized more closely because its opaque and highly interconnected nature could lead to systemic risks to the financial system in the generally.