The Bank of England is reportedly questioning lenders, including Barclays, regarding their exposure to the collapsed UK mortgage lender, Market Financial Solutions (MFS). According to the Financial Times, officials at the central bank’s Prudential Regulation Authority (PRA) have requested information from lenders concerning funds extended to the Mayfair-based bridging loan provider. The PRA is reportedly concerned that banks may not have performed sufficient due diligence.
MFS was placed into administration last week following allegations of financial irregularities and mismanagement, raising concerns about the exposure of banks and private credit funds. Barclays declined to comment when contacted by Reuters. A spokesperson for the Bank of England stated that they are constantly monitoring the financial system and wider markets and maintain close contact with firms, emphasising that firms are responsible for managing their own risks.
The central bank also noted that it regularly stress tests banks and insurers. Furthermore, it has initiated a system-wide exercise to examine how riskier forms of non-bank lending behave under stress and the potential consequences for UK financial stability. Barclays is reportedly owed £495 million from its exposure to MFS, according to a Reuters report.
While the PRA has not yet launched a formal investigation, it possesses the authority to impose fines and restrictions on banks that violate its regulations, the FT reported. Market Financial Solutions (MFS) provided bridging loans, and Barclays is a British universal bank.
