Legal advisors have been warning investment banks to stay away from large buy-out deals, it has been reported.
Lawyers are advising the banks to avoid large transactions on the grounds that it is cheaper to avoid the deals rather than risk additional losses on their funding commitments.
Should the banks act on the lawyers counsel, it could increase the likelihood that more high-profile private equity deals could be stymied, the Financial Times reports.
It has been argued by the lawyers that because of the current state of the market the break up charges that banks would have to pay would outweigh the writedowns they would have to make on their loans.
This is contravention to conventional wisdom that pulling out of such deals tarnishes banks' reputations.
An unnamed source told the Financial Times: "It is the tipping point argument. The banks have so many issues with their balance sheets that they are considering a new policy."
