Almost a year after announcing the move, HSBC is yet to invest any of the $4bn it set aside for its own private credit strategy as Europe’s largest lender reels from a $400mn hit linked to an Apollo-owned credit fund.

HSBC’s indirect exposure via one of Apollo’s private-credit units makes it one of the banks hit hardest by the collapse of MFS. Perhaps it is having second thoughts?

The likes of Apollo are in it to their necks and our insurers are now part of the portfolios of their likes.

The FT picks up the story from Hong Kong and American reporters. The London-listed HSBC said in early June last year that it would inject $4bn into its own asset manager’s range of private credit funds.

However, no funds have yet been transferred and there were no current plans to do so, according to two sources familiar with the decision-making process.

HSBC had been more than adamant they were out to compete with firms like Blackstone, Apollo , The private credit allocation was initially billed as a way for HSBC to leverage its $3.2tn balance sheet to muscle its way to the top table of alternative lending alongside private capital giants such as Apollo and Blackstone. When discussing the commitment last year, HSBC’s head of asset management Nicolas Moreau told Reuters that

“we see this as an arms race”.

An arms race to the bottom?

I am glad that HSBC is being cautious. If the answer to Britain’s shortage of finance for growth is through the kind of private credit funds that are in trouble, no thank you!

I see the British financial services industries as wise to take a step away from a race to what looks like the bottom for some massive American players. We are nearly 20 years on from the collapse of Lehman and all that followed. We need to be careful.

Earlier this week , I reported about the vulnerability of Legal and General to takeover by the same group of American companies including Brookfield (Just) , Apollo (Just) and Blackstone (which has lent it $20bn) and Prudential Financial (rumoured to investing with Standard Life along with CVC).

All of this money is from private companies purchasing UK assets (mainly pension fund assets) which are shipped back to America where they can be cheaply backed by private credit.

I am not a banker and certainly not the Bank’s regulator the PRA. But I can see a circularity in this funding and it makes me really worried.  MFS was a British mortgage lender which went bust.  Blue Owl and other American lenders are having trouble with liquidity (the Woodford problem).

HSBC is not raising funds providing private credit . I hope it is the start of about of common sense, we  cannot compete with American finance houses and  we shouldn’t want to.