The Bank of England has told lenders to improve oversight of their dealings with private equity firms amid fears they have unwittingly built up big exposures that will leave them nursing heavy losses in a crisis.
In an escalation of the central bank’s concerns about private equity, on Tuesday it wrote to several large UK and international commercial banks warning them that a review had found that many lacked a clear picture of their lending to the buyout sector and to individual private equity firms or the companies they own.
It ordered them to tighten up their risk management, including the ability to aggregate data on private equity-related activities and by conducting regular internal stress tests to gauge potential losses from the sector in the