British lawmakers are advocating for the Bank of England (BoE) to receive expanded authority to collect data on private credit markets. This push comes amid concerns that an upcoming stress test may not fully reveal the risks associated with this rapidly growing and somewhat opaque sector. A cross-party House of Lords committee published a report titled “Private markets: Unknown Unknowns”, highlighting insufficient data to assess whether private market growth poses a systemic risk to the UK’s financial stability. The committee has welcomed the BoE’s industry stress test, urging the government to empower the central bank to gather comprehensive information about the scale and interconnections between the banking system and private credit, should the need arise.
Sheila Noakes, a member of the House of Lords, clarified that the requested power is for information gathering and not direct regulation of the industry. The BoE initiated its first stress test late last year to evaluate how the $16 trillion global private equity and private credit industries would withstand a major financial shock, with results expected in early 2027. The parliamentary committee hopes to receive preliminary results sooner. Private credit, currently unregulated by the BoE, presents challenges as the central bank cannot compel all firms, many based overseas, to participate in the stress test.
Clive Hollick, a committee member, emphasised that private markets should be a priority for the finance ministry. The report raised concerns that the ministry lacked a “firm grasp” on the issue, especially considering past issues in the United States. A finance ministry spokesperson stated they have increased focus on non-banks recently and will respond to the committee’s report appropriately. The BoE has previously cautioned that the collapse of U.S. companies like First Brands and Tricolor could signal broader financial vulnerabilities.
The “Private markets: Unknown Unknowns” report stems from an inquiry initiated in July by the House of Lords committee. The committee heard evidence from the finance ministry, regulators, banks, trade associations, and asset managers. Despite these concerns, Hollick noted that the committee found no direct evidence of current harm caused by the market.
