Barclays has insisted it has the right controls in place to manage a £20bn exposure to the under-fire private credit industry despite warnings from the International Monetary Fund (IMF) and the Bank of England.
The bank’s chief executive, CS Venkatakrishnan, said it ran a “very risk-controlled shop” and was comfortable with its lending standards for the private credit industry. That was despite taking a £110m loss over the US sub-prime auto lender Tricolor, which collapsed amid fraud allegations last month.
Losses stemming from the dual collapse of Tricolor and the US auto parts company First Brands have raised fears over potentially weak lending standards in the private credit industry. There are concerns that the potential fallout could destabilise traditional banks that issue loans to the shadow banking sector.
The governor of the Bank of England, Andrew Bailey, said this week that the recent failures had worrying echoes of the sub-prime mortgage crisis that kicked off the global financial crash of 2008. Last week the IMF warned that a downturn could have ripple effects across the financial system, given banks were increasingly exposed to a largely unregulated private credit industry.
Venkatakrishnan said Barclays limited lending to private credit loan portfolios “constructed by some of the largest, most experienced managers with a strong track record.” He added that the bank turned down potential exposure to First Brands despite being approached multiple times.
His comments came as Barclays reported a 7% drop in pre-tax profits to £2.08bn in the three months to the end of September, down from £2.2bn during the same period last year. The bank also announced another £500m worth of share buybacks.
