Barclays CEO says he wishes the bank ‘had nothing to do’ with troubled Tricolor and MFS private-credit deals

Barclays Group Chief Executive C.S. Venkatakrishnan said Thursday if the bank could do it all over again, it would have had “nothing to do” with soured private-credit borrowers Tricolor in the US and Market Financial Solutions in the UK.

Potential losses on loans to the two companies hammer home the lesson that client selection “has always got to be the most important thing in banking,” Venkatakrishnan said at Semafor World Economy.

“What everybody in the bank understands is they’ve got to reflect on that and see that we don’t have clients like that inside this bank,” Venkatakrishnan said.

The bank will disclose on April 28 more details about the impact of its exposure to collapsed UK lender Market Financial Solutions (MFS). Venkatakrishnan reiterated that the bank expects its losses will be less than its total exposure of $600 million to MFS. The bank has also been a lender to bankrupt auto lender Tricolor, along with JPMorgan Chase and Fifth Third Bancorp.

While private credit issues could affect credit quality and liquidity, it’s not likely to cause systemic problems in banking, he said.

But it’s one of three major potential problems that could weaken the current health of financial markets, he said. The other two worries center on disruption caused by AI, the unknown inflationary impact of the war in the Middle East and whether it will cause an economic slowdown. These three issues are “lurking in the background” despite record stock market prices and robust capital markets and M&A activity, he said.

“In the short term, the equity markets are strong,” Venkatakrishnan said. “There’s a great belief in the continuation of deal activity. We’ve seen it and we expect it to continue.”

With AI, questions remain over its true potential and promise, and who the winners and losers will be, he said.