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LONDON, March 14 Reuters Europe39;s private credit funds are increasingly borrowing from banks to boost their performance, fuelling concerns about the wider risks posed by this interconnectedness.

A record 80 of new European private credit funds borrowed from banks via 39;subscription lines39; in 2023, funding that allows them to lend before tapping their investors for cash, MSCI Private Capital Solutions research shared with Reuters shows.

Subscription lines are used by some credit funds to enhance returns, a separate MSCI study found. MSCI studied pools that were set up recently because funds are most likely to use subscription lines when they start operating.

Regulators including the Bank of England BoE are already probing potential risks posed by lenders39; exposure to credit funds, which are loosely regulated and typically finance firms that struggle to borrow directly from banks or in bond markets.

The boom in socalled shadow banks has also raised the alarm among some financiers, who point to the possibility of new asset bubbles that could undermine financial stability.

Increasing engagement in the private credit domain … brings them banks closer to the sector39;s inherent risks, said Chris Naghibi, Chief Operating Officer of First Foundation Bank.

Some private credit funds are also adding…