1、Bridging the data dividePrivate equity financing risk 1 Executive summary.3 2 Background.6 3 Key data challenges.10 4 Potential remediation actions.14 5 Conclusion and next steps.21 Contacts.22 Disclaimer.22 About EY.23ContentsTable ofExecutive summary12Private equity financing risk Bridging the dat
2、a divide1|Executive summarySignificant growth in the bank exposures to the global private equity(PE)sector has triggered heightened regulatory scrutiny of their PE risk management practices.This has focused on the banks ability to identify,measure,monitor and report PE related risk at an enterprise
3、level.The UK PRA conducted a thematic review of PE financing activity at regulated banks,identified weaknesses in risk management practices and issued a letter to Chief Risk Officers(CROs)in April 2024.In response to the PRAs letter,PE related data availability,quality and consistency were identifie
4、d as overarching challenges for banks to align to regulatory expectations.Key data challenges are outlined below:Regulatory interpretation:Varying interpretations of regulatory expectations and requirements,for instance the definition of a“Financial Sponsor”,or expectations around PE industry stress
5、 testing methodologies,could lead to a range of measurement techniques,data requirements and assumptions across different banks.Data availability:Whilst Know Your Customer(KYC)and client onboarding processes are being considered as sources of incremental PE client data,using these sources to enhance
6、 data coverage may prove difficult.For instance,banks need to be able to differentiate between Sponsors and Ultimate Beneficial Owners(UBOs).They also need to be able to update data sets more frequently than existing KYC cycles.There may also be broader data requirements for PE risk management purpo