(Bloomberg) -- Barclays Plc is scaling back its asset-based lending to smaller borrowers, according to people with knowledge of the matter, after the collapses of Market Financial Solutions Ltd. and Tricolor Holdings left the firm facing losses.
The British bank is shifting its focus to loans and securitizations for larger corporates, said the people, who asked not to be identified discussing private information. The bank has already pulled back from a number of deals and increased pricing to reflect higher perceived risks, one of the people said.
A representative for Barclays declined to comment.
The downfall of UK property lender MFS and US subprime auto company Tricolor have put a spotlight on lending to non-bank entities that fall outside of regulatory purview. Much of this lending is private, without input from ratings firms, and can be backed by various income-generating assets, such as credit cards, auto loans or mortgages.
Banks often provide credit lines known as warehouse facilities to these nonbanks to fund their lending products, which are then packaged into asset-backed securities and sold to bond investors.
Barclays reported it had £160.6 billion ($215 billion) of exposure to securitized assets as an originator or sponsor of such deals at the end of 2025, a slight decrease from the year prior, according to a financial filing. That includes loans to corporates and residential mortgages, among other assets.
To be sure, Barclays frequently reworks lending portfolios to mitigate risk, and can adjust terms or collateral accordingly, one of the people said. Barclays could reverse course in the future if the risk profile changes, the person said.
Banks have scaled up relationships to specialist lenders in recent years as a way of accessing high yields while staying within the stringent regulations put in place after the 2008 financial crisis. These often entail taking on the senior tranche of a securitized package of loans, which receives much kinder regulatory treatment than if they had done the lending themselves.
For MFS, which collapsed last month, the company and a sprawling group of associated entities borrowed more than £2 billion from firms including Barclays and Apollo Global Management Inc.'s Atlas SP Partners. MFS used the money to finance short-term real estate loans.
Barclays is owed about £500 million by MFS, though Chief Executive Officer CS Venkatakrishnan has said any impairment would be "materially lower" than that figure.
Barclays had provided a warehouse line to Tricolor backed by auto loans alongside JPMorgan Chase & Co., and reported a £110 million credit impairment charge tied to the bankrupt firm in the third quarter.
Venkatakrishnan said at a Morgan Stanley conference earlier this month that both cases appeared to reflect "fairly deep and sophisticated fraud."
"Obviously I'm disappointed we had anything to do with either," he said. "I take risk management very seriously and we don't like to find ourselves in these situations."
(Adds CEO comments in last two paragraphs.)
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