City Regulator on Alert as First Brands and Tricolor Bankruptcies Shake Private Asset Markets

The collapse of First Brands and Tricolor in the United States has placed the private assets sector under the microscope, with Britain’s Financial Conduct Authority now closely monitoring the repercussions. These two companies—a car parts supplier and a subprime car lender—both entered bankruptcy last month, exposing significant vulnerabilities within a corner of the financial system that has expanded rapidly with minimal oversight over the past decade. Their failures have raised alarm among investors, who are questioning whether these events indicate deeper systemic issues lurking within the private markets.

Simon Walls, interim executive director of markets at the FCA, described the incidents as “interesting case studies” for the regulator. He highlighted the rarity of such blows to private markets, remarking that the financial system has yet to experience this phase of the cycle. Walls pointed to concerns about the underwriting standards involved and acknowledged uncertainty about whether the collapses reflect isolated problems or signal broader, structural fragilities.

The Bank of England’s financial policy committee also weighed in, labelling the bankruptcies “notable credit defaults” and observing that the arrangements behind First Brands and Tricolor shared worrying features. These included high leverage, weak underwriting standards, a lack of transparency, complex structures, and a heavy reliance on credit rating agencies. All these traits are red flags for risk, particularly in markets with limited regulatory oversight.

First Brands, which declared bankruptcy last week, reported liabilities estimated between £8 billion and £40 billion. Raistone, a trade finance creditor, accused the company of being unable to account for £1.8 billion, sparking suspicions and demands for scrutiny. Major financial institutions are now counting their exposures—UBS faces over £390 million at risk, while Jefferies confronts a potential loss of roughly £557 million. There are also suggestions of financial irregularities at First Brands and allegations of fraud at Tricolor, compounding the sense of crisis.

The FCA’s annual meeting in London saw the regulator come under fire from members of the public, who cited previous failures such as the collapse of Neil Woodford’s fund and other financial scandals. This suggested deep-seated anxieties about the watchdog’s effectiveness in protecting investors from mismanagement and malfeasance in the private markets.

As scrutiny of the private asset sector intensifies, attention will remain fixed on both the true scale of the damage and whether other firms might be exposed to similar weaknesses. The coming months could prove pivotal in revealing if these bankruptcies are unfortunate outliers or early indicators of wider instability within private finance.