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The Bank of England is grilling lenders over their exposure to a UK-based mortgage lender that collapsed abruptly last week amid fraud allegations, prompting supervisors to check if creditors carried out sufficient risk assessments and due diligence.
The collapse of Mayfair-based Market Financial Solutions and several linked companies owned by its founder Paresh Raja threatens to inflict big losses on banks that lent the group more than £2bn.
It also reinforces the BoE’s concern over the risks of private credit markets following the twin implosions last year of US companies Tricolor and First Brands Group, which sent shockwaves through Wall Street.
Officials at the central bank’s Prudential Regulation Authority have requested more information from banks, including Barclays, about the money they lent to MFS to fund its offer of “complex, property-backed lending” consisting of short-term bridging loans, according to people familiar with the situation.
The PRA is worried there may have been insufficient risk assessment and due diligence checks carried out by the banks on MFS and its sister companies, which have been linked to a property scandal involving a Bangladeshi politician.
Regulators are also trying to determine whether banks had indirect exposure to MFS through lending lines they provide to private capital groups, known as back leverage, the people familiar with the discussions added.
Large banks and firms such as Santander, Jefferies, TPG, Apollo’s Atlas SP Partners and Castlelake also extended hundreds of millions of dollars in loans to the failed mortgage lender. Some of these companies are likely to have used leverage from banks to make the loans.
A court put MFS into administration last week amid creditor accusations of double-pledging of its collateral. The shortfall in collateral backing loans to MFS entities is estimated to be as much as £930mn, according to three people with direct knowledge of the matter.
Barclays and other lenders first recognised financial irregularities relating to their investments in November, the FT previously reported. Barclays, which also provided banking services to MFS, froze the bridge loan provider’s accounts in January.
The PRA has the power to investigate breaches of its rules by banks and to impose penalties including fines, bans and restrictions on activities. However, people briefed on the matter said the authority was yet to launch a formal investigation over MFS.
“We are constantly monitoring the financial system and wider markets and stay in close contact with firms,” the BoE said in a statement to the FT, declining to comment on any specific company. “It is the responsibility of firms to manage the risks to which they are exposed.”
The collapse of MFS has intensified fears about poor underwriting standards in the fast-growing asset-backed lending market, which is increasingly funded by private credit providers that benefit from lighter regulation than banks.
After the back-to-back failures of US companies Tricolor Holdings and First Brands Groups last year, the BoE announced plans to carry out the world’s first major stress test of the private capital market, checking what a crisis in the fast-growing market would mean for the overall UK financial system.
The BoE also said: “We regularly stress-test banks and insurers and have also launched a System-Wide Exploratory Scenario focused on private markets including developments in some of the riskier forms of non-bank lending, how they operate under stress, and any potential implications for UK financial stability.”
The central bank is working closely with the Financial Conduct Authority, which supervised MFS’s compliance with anti-money laundering rules. The FCA said it could not comment on individual cases, adding: “Fighting financial crime is a priority for the FCA, and we take credible allegations of criminality very seriously.”
A large part of MFS’s business involved backing dozens of property deals linked to Saifuzzaman Chowdhury, a former land minister in Bangladesh. Along with certain family members, he built a sprawling $295mn property portfolio from 1992 until August 2024, when the government of Sheikh Hasina in Bangladesh collapsed amid student protests.
MFS-linked entities were listed as being involved in 291 of the 495 charges registered by the companies against properties in England and Wales, the FT reported last year. The UK’s National Crime Agency froze 342 properties linked to Chowdhury, worth about £185mn, in June 2025 as part of “an ongoing civil investigation”.
Barclays, which also provided banking services to MFS and has amassed roughly £600mn of exposure to the group, according to the judge overseeing the case, began blocking certain transactions for the lender in late 2025 before freezing its accounts in January, according to multiple people familiar with the matter.
Barclays declined to comment.