Bank of England asks banks to report private credit exposure -sources
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Bank of England asks banks to report private credit exposure -sources
LONDON, Dec 7 (Reuters) - Britain's top financial regulator has asked banks active in the so-called private credit market for details of their exposure to an area which it has identified as a top systemic danger, people with knowledge of the matter told Reuters.
The global market for private credit, which largely involves leveraged loans made to indebted companies, grew to nearly $1.5 trillion in 2022, a jump of more than 40% from 2020, London-based data firm Preqin estimated.
The Bank of England's Prudential Regulation Authority (PRA)has identified risks in private credit and leveraged lending and has given banks including JP Morgan, Goldman Sachs and Bank of America until the end of 2023 to respond, two people said.
The banking regulator's request, which has not been previously reported, includes sharing details of individual clients, the people said.
Banks with wholesale operations and private equity business have been expanding in private credit in a search for returns.
But the lack of transparency in these pockets of the financial system means the size and risks might not be entirely visible in banks' balance sheets, the person added.
The BOE said in its financial stability report this week, that riskier corporate borrowing, such as private credit and leveraged lending appears "particularly vulnerable".
"The opacity of private credit markets makes risks in the sector challenging to monitor in the UK and globally," it added. A RA spokesperson declined to comment. JP Morgan, Goldman Sachs and BofA also declined to comment.
