Bank of England said to be reviewing Barclays’ handling of private credit loans
Summary
The Bank of England is investigating Barclays' handling of loans connected to private credit firms, after concerns about how the bank recorded financial contracts called derivatives. These contracts may have been placed in the wrong category, making the loans look less risky and possibly meaning Barclays held too little capital to cover potential losses.Key Facts
- The Bank of England’s Prudential Regulation Authority started reviewing Barclays earlier this year.
- The review followed concerns raised by a Barclays insider about how derivatives tied to private credit loans were logged.
- Derivatives are financial contracts that track the value of assets and were reportedly placed in the wrong risk category.
- Incorrect classification could mean Barclays did not keep enough money aside for possible losses, potentially increasing profits improperly.
- Barclays has billions of dollars in exposure to private credit loans through these derivatives.
- Barclays declined to comment on regulatory interactions; the Bank of England also did not comment.
- Barclays’ shares fell 3.5% on the news, the second-largest fall on the FTSE 100 index.
- Private credit firms lend money from investors to companies, operate with less regulation, and have caused concerns about lending standards and risks to traditional banks.
- Barclays and other banks lost money when private credit-backed companies like Tricolor and Market Financial Solutions collapsed amid fraud allegations.
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