LONDON (Reuters) – Britain’s Prudential Regulation Authority (PRA) has asked Barclays to review its leveraged financing exposure, a source familiar with the matter said on Friday, as part of an industry-wide investigation into lenders’ exposure to the private equity industry.
In April, the Bank of England said very few banks had a clear understanding of their “holistic” private equity exposure, exposing them to the risk of “large losses.”
Rebecca Jackson, the central bank’s executive director for permitting and international supervision, wrote to bank risk managers at the time outlining the standards they should meet when assessing exposure to such risks.
A PRA spokesman declined to comment.
The review is being carried out in the form of a so-called section 166 report, meaning the matter will be handled by an independent, qualified professional, the source said.
Regulators around the world need to take a closer look at the $8 trillion global private equity sector as opaque levels of leverage make it difficult to understand the risks it poses to financial stability, another Bank of England official said in April.
Private equity funds raise money from large institutional investors to invest in non-public companies, a more opaque form of financing than the public capital markets.
Globally, assets under management in the private equity sector increased to approximately $8 trillion in 2023 from approximately $2 trillion in 2013.
Bloomberg News reported the Barclays review earlier Friday.
The potential results of the review are unclear, and it is the first of many similar reviews the regulator is expected to require of the industry, Bloomberg reported.