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 The Bank of England has launched an investigation into the rapid growth of London investment banks' exposure to Asian equities, as regulators seek to prevent the build-up of highly concentrated bets on a limited number of artificial intelligence-linked companies, according to a report by the Financial Times.

Many of the world's largest investment banks provide financing for hedge funds and other institutional clients in Asia through their United Kingdom operations.

PRA Reviews Prime Brokerage Operations

The Prudential Regulation Authority (PRA), the arm of the Bank of England responsible for supervising UK lenders, has initiated a formal review of prime brokerage operations in London. The probe aims to determine whether financial institutions are accumulating overly concentrated exposures to Asian stock markets.

Surging AI Valuations Drive Leverage

This segment of banking, which was previously limited in scope, has experienced a boom driven by sharp valuation increases among companies operating in the AI sector. The rise in asset values has significantly boosted the value of client holdings and encouraged institutions to borrow more aggressively, prompting regulatory scrutiny over potential market risks.