The UK's Financial Conduct Authority has launched an investigation into Market Financial Solutions, the mortgage lender that collapsed amid fraud allegations. The probe follows the insolvency of the Mayfair-based lender and its linked companies, which threatens to inflict major losses on creditors that lent the group more than £2bn. Regulators have grown increasingly concerned about risks in private credit markets following recent high-profile collapses.

Large financial institutions including Santander, Barclays, Jefferies, TPG, Apollo's Atlas SP Partners and Castlelake extended hundreds of millions in loans to the failed mortgage lender. Creditors now face an alleged shortfall of £1.3bn, with about £250mn unaccounted for after discovering a network of borrowers seemingly tied to its founder Paresh Raja. Some lenders may have used leverage from banks to make these loans.

The FCA's investigation marks the first formal probe into MFS by UK regulators. The Bank of England