"The bank said on Tuesday that although it had no exposure to First Brands, which sells car parts across the US, it had taken a $170m (128m) hit from Tricolor, which collapsed amid fraud allegations last month."
"These are very smart players: they know what they're doing, they've been around a long time. But they're not all very smart. And we don't even know the standards of other banks [that] are underwriting to some of these entities. And I would suspect that some of those won't be as good as you think."
"My antenna goes up when things like that happen. I probably shouldn't say this but when you see one cockroach, there's probably more. And so everyone should be forewarned at this point, he said during an analyst call."
The collapse of Tricolor amid fraud allegations produced a $170m hit for a major bank, while the bank reported no exposure to First Brands. Both firms were financed by private credit within the unregulated shadow banking sector, which lacks mandatory disclosure of risk levels. Regulated banks acquire exposure through direct lending to private businesses or to private credit firms. Links between banks and the $3tn private credit industry raise concerns that further failures could cause additional losses. Variations in underwriting standards across private credit firms and other lenders could reveal weak links during a downturn.
Read at www.theguardian.com
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