<div id="readability-page-1"><div><div><p>HSBC has slammed the brakes on its $4bn (£3bn) shadow banking drive amid fears of a crisis in the unregulated sector.</p><p>The bank said in early June last year that it would invest billions into its own asset manager’s range of private credit funds. However, no funds have been transferred and there are reportedly no plans to do so.</p><p>HSBC’s decision to halt its push into shadow banking comes after it was stung with a $400m hit related to the collapse of Market Financial Solutions (MFS).</p><p>Mayfair-based MFS collapsed into administration in February amid what a judge described as “very serious” allegations of fraud. The company has been accused of double-pledging assets to back loans, creating a £1.3bn hole on its balance sheet.</p><p>As a so-called shadow bank, MFS did not take deposits but instead funded its loans by borrowing from banks and other financial firms. A cast of high-profile banks – including Santander, Wells Fargo, Jefferies and Barclays – backed MFS before its collapse.</p><p>Earlier this month, HSBC disclosed a $400mn “fraud-related” charge tied to MFS. The bank said that it had indirect exposure through a financial sponsor, understood to be from Atlas, the asset-backed lending unit of private investment giant Apollo.</p><p>HSBC’s shadow banking drive was initially billed as a way for the bank to muscle into the territory of private capital giants like Apollo and Blackstone.</p><p>But the pause, first reported by the Financial Times, comes amid wider fears about a looming crisis in the shadow banking industry.</p><p>Private credit is a form of shadow banking, where loans come from non-banking sources such as hedge funds, which are subject to less stringent regulations.</p></div></div><div><div><p>The sector has grown rapidly since the financial crisis as tighter regulations on traditional banks pushed riskier forms of finance into unregulated markets.</p><p>Concerns have been mounting over loose lending standards and the opacity of the sector, with Lloyd Blankfein, the former boss of Goldman Sachs, warning earlier this year that he could “smell” a crash on the horizon.</p><p>Andrew Bailey also recently called for a review of how private credit and other non-banks are regulated. The Bank of England governor said the current regime needed to “have its tyres kicked”, adding there needed to be clear distinctions between protecting trust in money while avoiding the need to bail out institutions that make risky bets.</p><p>Jamie Dimon, chief executive of JP Morgan, has also warned about the private credit sector, saying more “cockroaches” could emerge after the collapse of the subprime auto lender Tricolor and the car parts supplier First Brands.</p><p>Both companies were heavy users of private credit and JP Morgan took a $170m hit from the collapse of Tricolor.</p><p>Mr Dimon also warned in his annual letter that losses from private credit were likely to be larger than expected, as lending standards in the sector had been “modestly weakening pretty much across the board”.</p><p>A HSBC spokesman said: “We are committed to our asset management’s offering in private credit funds.”</p></div></div></div>

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<p>HSBC has halted its $4bn shadow banking initiative due to concerns over a potential crisis in the unregulated sector. Initially announced in June last year, the bank planned to invest in private credit funds but has not transferred any funds and has no current plans to proceed.</p>

- HSBC has halted its $4 billion shadow banking initiative amid concerns over a crisis in the unregulated sector, following a $400 million loss linked to the collapse of Market Financial Solutions.  
- The decision comes as the shadow banking industry faces scrutiny over loose lending standards, with warnings from prominent financial leaders about potential fallout.  
- HSBC aims to maintain its asset management focus in private credit funds despite these complications.

The telegraph

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HSBC puts $4bn shadow banking drive on hold amid crisis fears