Barclays is scaling back lending to smaller businesses and private credit firms after suffering losses linked to the collapse of several high-risk lenders, in a move that signals growing caution across the banking sector.
The lender is understood to be reducing its exposure to asset-based lending for smaller borrowers and shifting its focus towards larger, more established corporate debt providers. The strategy change follows the failures of firms including Market Financial Solutions and Tricolor Holdings, which have triggered losses and heightened concerns about risk within the fast-growing private credit market.
According to reports, Barclays has withdrawn from a number of deals and increased pricing on others to reflect the higher perceived risk environment. The move reflects a broader reassessment of private credit, a sector that has attracted significant investment in recent years due to its promise of higher returns, often in the range of 8 to 10 per cent annually.
However, those returns are frequently underpinned by leverage, amplifying both gains and potential losses. Recent events have exposed vulnerabilities in the sector, including concerns over transparency, asset valuations and rising default rates in a higher interest rate environment.
The collapse of Market Financial Solutions has been particularly damaging. The lender entered administration earlier this year after a High Court judge ordered an investigation into alleged fraud and financial mismanagement. Insolvency practitioners have since claimed there is compelling evidence of serious irregularities, including the possibility that some loans may be entirely unsecured.
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