Barclays PLC (LSE:BARC) is to explain its exposure to the private equity sector as concerns increase about how much has been lent to finance leveraged or highly debt-funded deals.
According to a report by Bloomberg, the UK bank has been told by the Prudential Regulation Authority, the Bank of England’s financial sector regulator, to commission a section 166 review of the business.
Barclays will now have to bring in an outside expert to examine its practices and produce an independent report for the authorities.
The report is the first of several instructions expected to be issued by the PRA, which has reportedly become alarmed by how much debt is tied up in private equity buyouts.
Other banks have been ordered to start stress tests on their exposure to private equity firms, said Bloomberg.
In April, the PRA sent a letter to chief risk officers reminding them they had to “comprehensively identify, measure, combine, and record risks” tied to buyout funds and the companies they back.