The Bank of England's Prudential Regulation Authority is reviewing Barclays' handling of private credit loans after an insider raised concerns about how derivatives were logged. The bank's shares fell 3.5% on Monday.
The Bank of England's review into Barclays' private credit loan handling could lead to regulatory action and impact the bank's capital requirements and profitability. The private credit sector's interconnectedness with traditional banks raises broader concerns about financial stability.
The Bank of England's Prudential Regulation Authority is reportedly investigating Barclays' management of loans tied to the private credit sector. The review, initiated earlier this year, stems from concerns raised by a Barclays insider, according to the Financial Times. The core issue involves how financial contracts, known as derivatives, used to finance the bank's loans to private credit firms were logged. These derivatives may have been incorrectly categorized in a less risky portfolio, potentially leading to the bank holding insufficient capital to cover potential losses and artificially boosting profitability. Barclays has reportedly accumulated billions of dollars in exposure to private credit through these derivatives. In response, Barclays stated it takes its regulatory obligations seriously and does not comment on interactions with regulators, while the Bank of England declined to comment. Shares in Barclays experienced a 3.5% decline on Monday, impacting its position on the FTSE 100 index, ahead of its financial results announcement on Thursday. Last year, Barclays' CEO had affirmed the bank's controls for managing its private credit exposure.
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