BoE stress test puts private credit, PE and insurers in the same systemic-risk frame

Participants submitted information on around 180 private credit funds covering about £370bn of capital, alongside private equity funds covering about £400bn. They include banks, pension funds, insurers, endowments, liquid credit managers and alternative asset managers. The alternative asset managers running those funds make the investment decisions.

The Bank says Round 1 is intended to show how banks and non-banks active in private markets would respond to a severe downturn, how their actions interact at system level, and whether those interactions amplify stress across the financial system and threaten UK financial stability and the supply of finance to the real economy. It will then give participants aggregated feedback on how other firms acted, after which they may update their responses.

Its questions ask what a global downturn does to UK private-market assets and how those assets are managed under stress, how institutional investors' allocations and banks' willingness to lend change, and how far private credit and related markets such as syndicated loans and high yield bonds substitute for one another — transmitting the shock or absorbing it. The focus is the provision of private-market finance to UK corporates, extended to substitutable liquid credit markets and relevant bank financing.

The work runs under the Financial Policy Committee and the Prudential Regulation Committee, supported by the PRA, the FCA and TPR. Initial information-gathering findings go into the July Financial Stability Report, interim Round 1 findings later in 2026, and the final report in 2027. Because participation is voluntary, the exercise is not a binding capital or conduct requirement.

Sources: bankofengland.co.uk · bankofengland.co.uk