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Paul J. Davies

Banks Didn’t Listen to Buyout Boom Warnings. That’ll Cost Them.

Regulators have tried to cajole lenders to curb financing for private equity deals to little effect, so tougher measures are on the way.

European banks have ignored signs from regulators 

European banks have ignored signs from regulators 

Photographer: Krisztian Bocsi/Bloomberg

Europe’s top finance watchdog is preparing to hit banks that lend aggressively to private equity with demands that they put more capital behind these activities. That’s what they get for not listening to advice. 

The European Central Bank is increasingly concerned about leveraged loans, which are created by banks to finance buyouts and dividends. Andrea Enria, chairman of supervision at the ECB, warned banks in July that he would use all the tools he could to cut risks in this market.