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2025-10-22 17:57:37
Bank of England Governor Warns of Risks in Private Lending Markets: (1) Bank of England Governor Andrew Bailey stated on the 21st that the collapse of First Brands and Tricolor in the US serves as a wake-up call for risky lending practices in the private lending market. (2) Bailey compared the current situation to the period leading up to the 2008 financial crisis, noting the resurgence of the practice of layering and packaging financial products. (3) The two companies' September bankruptcy resulted in losses for credit investors and are currently under investigation by the US Department of Justice. (4) Tricolor packaged its loans into bonds, while First Brands used specialized funds to secure credit against its invoices. (5) Months before Tricolor's bankruptcy, some of its debt layers still held the highest AAA rating, with loans primarily going to borrowers with no credit history. (6) Bailey, testifying in the House of Lords, stressed the need to be wary of a recurrence of historical practices such as layered and detailed loan structures, and recalled the lessons learned from miscalculations before the 2008 crisis. (7) The International Monetary Fund warned last week that European and American banks' exposure to non-bank financial institutions reached $4.5 trillion, potentially amplifying the impact of an economic downturn. ⑻The Bank of England is considering implementing a system-wide stress test in 2025 to test the private credit market's ability to resist crises.
