Barclays has suffered a £110m hit from its exposure to Tricolor, the subprime US car lender that was plunged into bankruptcy last month after being bankrolled by private credit.
The City lender unveiled the impairment in its latest quarterly accounts on Wednesday, in the first example of a UK company recording major losses from the so-called shadow banking sector.
CS Venkatakrishnan, the chief executive of Barclays, said the bank is now looking at “what lessons we can learn” from its exposure to Tricolor, which collapsed against a backdrop of fraud allegations.
He said: “The exposure was obviously not a surprise. The surprise was the fraud. Now, fraud is no excuse for us.
“We take our credit risk management very seriously at all points in the cycle, and credit lending has to be prepared for all outcomes, including fraud.”
The US department of justice has since launched an investigation into allegations of wrongdoing at Tricolor as banks brace for millions worth of losses.
However, the company’s collapse has also fuelled concerns about the health of the private credit market following a similar failure at car parts manufacturer First Brands.
The Texas-headquartered firm, which was started in 2007, built its business selling high-interest car loans to low-income Hispanic customers.
Its downfall has led to concerns about a repeat of the subprime mortgage crisis that led to the global financial crisis of 2008.
Andrew Bailey, the Governor of the Bank of England, on Tuesday said the bank took “very seriously” the prospect that the recent implosions could be a “canary in the coal mine” for a broader crisis in the private credit market.
Barclays is the most exposed to the US market of any of the London banks, leading to fears it could be caught up in a wider debt meltdown.
The bank has around £20bn worth of exposure to the private credit market, of which 70pc of those loans relate to the US market, with the remainder linked to Europe.
Barclays added that it had no exposure to First Brands and said it turned down lending to the company owing to a lack of data.
Mr Venkatkrishnan said: “We did not have first brands, we were approached a couple of times, but we said no. What these two instances show is that we will likely be monitoring our portfolios more carefully.”
