BOE Chief Says U.S. Firm Collapses Ring "Alarm Bells"

The collapse of two U.S. companies could be a sign of wider problems in the financial system, and “alarm bells” are ringing, the governor of the Bank of England (BOE) has said, Michael Sheils McNamee reported for BBC News.

The bankruptcies of First Brands and Tricolor have raised questions about the quality of deals in the private credit market. (Photo: Pubdog Wikimedia Commons)

Andrew Bailey told a House of Lords committee that it was important to take the failure of car parts supplier First Brands and subprime car lender Tricolor “very seriously,” drawing parallels with the 2008 financial crisis.

He said it was unclear whether these were isolated cases or “the canary in the coal mine.” Bailey also said the BOE was planning to run a “stress test” of private equity and credit firms.

The bankruptcies of First Brands and Tricolor have raised questions about the quality of deals in the private credit market — where companies arrange loans from non-bank lenders.

Bailey said he did not want “to sound too foreboding at this point,” but added that “there is a lot we don’t know about First Brands and Tricolor.”

“I think the big question,” he continued, “is: are these cases idiosyncratic, or are they what I call the canary in the coal mine? Are they telling us something more fundamental about the private finance and private assets sector?”