The collapse of Market Financial Solutions (MFS) in February sent shockwaves throughout the institutional investment space and has left major banks nursing enormous losses.
HSBC recently announced a $400 million (€344 million) hit through loans made to an intermediary, following Barclays’ £228 million (€263 million) charge. Court documents reveal a £1.3 billion (€1.5 billion) shortfall between what MFS owed creditors and the assets actually held on its books, with allegations that it had been pledging the same properties as security for multiple loans simultaneously. It has also transpired that its founder transferred at least £408 million (€471 million) to personal accounts before the firm imploded. For real estate lenders, this raises the question of how MFS was able to grow its loan book to £2.4 billion (€2.8 billion) before anybody noticed it was built on sand.
Filling the gap
It is important not to lose sight of what private
