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Bank claim: Private equity could cause another financial crisis

The Bank of England (BoE) has warned that debts incurred by private equity deals could lead to another financial crisis.

It says companies with heavy debts that have been bought out by private equity firms could lead to another financial crisis. Many of these companies were purchased using borrowed money before 2008 but the BoE feels that their mounting debts will cause problems in 2014.

To reduce the risk of another financial crisis, the BoE says that it will be looking at ways to put finances back into these companies.

Current credit conditions suggest that it is unlikely that these private equity firms will be able to repay their debts.

Banks were one of the causes of the 2008 crisis as they lost large sums of money through investments that could not be repaid.

Major banks had to find ways to stop themselves from collapsing, which involved the government having to bail out Royal Bank of Scotland and Lloyds using money from the taxpayer.

Amir Hussain

Amir specialises in personal loans, consumer debt and debt management.ADNFCR-2776-ID-801556607-ADNFCR

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