British multinational universal bank Barclays PLC (NYSE:BCS) shares are trading lower on Friday.
The Prudential Regulation Authority (PRA) has directed Barclays to conduct a detailed review of its leveraged finance exposure, in the wake of a broader examination of how U.K. banks are managing risks associated with private equity investments.
As financial institutions grapple with opaque private equity dealings, the PRA's request indicates a major move to safeguard the sector against unforeseen financial losses, reported Reuters.
In April, the Bank of England expressed concerns about the banking industry's lack of comprehensive understanding of their total exposure to private equity, which could potentially lead to significant financial vulnerabilities.
The review by Barclays will be conducted through a section 166 report, involving an independent skilled person to investigate the bank's exposure levels.
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This step is part of an industry-wide initiative to enhance transparency and control over leveraged financial dealings within the private equity sector.
Valued at approximately $8 trillion globally, the private equity sector's complex leverage arrangements pose challenges in assessing the full extent of financial risks.
The growth of the private equity sector has been substantial, with global assets under management increasing from around $2 trillion in 2013 to about $8 trillion in 2023.
Barclays reported first quarter FY24 net income of £1.55 billion pounds, which was way ahead of expectations.
BCS stock has gained 33% in the last 12 months. Investors can gain exposure to the stock via the Dimensional International Value ETF (NYSE:DFIV) and ActivePassive International Equity ETF (NYSE:APIE).
Price Action: BCS shares are trading lower by 3.3% at $10.25 at last check Friday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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