The Bank of England has begun a system-wide stress test of the $16tn private equity and private credit industries to assess how the sector would respond to a severe financial shock, marking the central bank’s most ambitious review of private markets to date, Reuters reports.

The exploratory exercise, which will publish its final report in early 2027, will evaluate the impact on the UK economy rather than identify vulnerabilities at individual firms. The BoE cannot compel participation because it does not regulate private equity or investment funds, but a group of major global asset managers has agreed to take part.

Participants include Apollo Global Management, Bain Capital, Blackstone, Carlyle, CVC Credit Partners, Goldman Sachs Asset Management, KKR, and Permira. Together they account for about one third of UK leveraged buyout activity, half of private credit lending to large UK corporates, and 40% of employment in private equity-backed businesses.

The test will run in two stages, allowing firms to indicate how they would react to the decisions of others during a crisis. It will examine how investors fund themselves and how shocks could cascade through financing structures for large British businesses. Venture capital and commercial real estate will not be included.

The BoE flagged recent corporate failures, including car parts maker First Brands and lender Tricolor, as reminders of the risks linked to high leverage, weak underwriting, opaque structures, and overreliance on credit ratings. Governor Andrew Bailey has warned that private markets have grown substantially but have yet to face a major stress event.

Findings will be shared with the Financial Stability Board, where Bailey has made private market resilience a priority for global regulators.

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