BoE tells lenders to get data on private equity or risk ‘large loss’

LONDON: The Bank of England said on Tuesday that very few banks had a clear idea of their exposures to private equity, putting them at risk of a “large loss“.
The central bank had already announced it was taking a deep dive into what it sees as opacity and complexity in the world’s $8 trillion private equity sector and its extensive links to banks.
Rebecca Jackson, the bank’s executive director for authorisations and international supervision, set out some of the initial findings on Tuesday.
“The finding that I would like to focus on today is that only a very small number of banks can consistently aggregate data in a manner that is appropriate to their exposures to the private equity sector,” she told an event held by UK Finance.
“The overall risk here is that when banks fail to properly measure and assess their aggregate exposures, and in the absence of a defined risk appetite framework and board engagement, it’s very easy to develop an outsized and concentrated exposure that leaves one open to the risk of a large loss.”
There is a need for significant improvements at many banks, she said.
“It’s clear that these need to happen now,” she said.
The speech follows a broader view from the BoE on Monday on the role of private equity, its links to banking and concerns that opacity on leverage in the $8 trillion global sector raises.

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