Reported 4 months ago
The European Central Bank is assessing how top banks in the region lend to the private equity sector amidst increasing corporate default risks. The ECB is conducting a thorough review with major lenders to ensure appropriate default probabilities for loans to heavily indebted companies owned by private equity funds. This move is part of ongoing efforts to curb excessive risk-taking and lax risk management practices in lending to private equity, potentially leading to demands for increased provisions or capital reserves from banks and impacting profitability. The industry is facing challenges as interest rate hikes signal the end of cheap credit, thus prompting the need for strengthened risk management frameworks in banks.
Source: YAHOO