The largest players in private markets are participating in the Bank of England’s first stress test of the sector, with its findings set to be published in early 2027.
The central bank announced earlier this week that it was probing the resilience of private markets, amid concerns of potential risks to UK financial stability.
The “system-wide exploratory scenario” (SWES), which launched today, will explore whether the rapidly-growing private markets ecosystem is resilient enough to weather a downturn.
Apollo Global Management, Arcmont Asset Management, Ares Management, Bain Capital, Barings, Blackstone, Carlyle, CD&R, CVC Credit Partners, Goldman Sachs Asset Management, Hayfin Capital Management, Hg, ICG, KKR, Oaktree Capital Management and Permira have voluntarily agreed to participate.
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These asset managers collectively account for around one third of UK private equity leveraged buyout activity, around half of UK and global private credit activity to the corporate sector and around 40 per cent of employment in UK private equity-sponsored corporates over the past three years, the Bank said.
Additional participants will comprise large banks providing credit to private market funds and private equity-sponsored corporates, as well as institutional investors.
The Bank highlighted that the exercise is not a test of the resilience of the individual firms that are participating, as its focus is system-wide.
Most of the SWES will be completed in 2026, with a final report published in early 2027.
An update will be provided over the course of 2026.
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“Private equity and private credit play an increasingly valuable role in helping UK companies to innovate, invest and grow,” said Sarah Breeden, deputy governor for financial stability.
“To keep delivering those benefits, we need a robust understanding of how risks might flow through the financial system in a stress. This exercise provides a unique opportunity to work collaboratively with firms to build that system-wide understanding together.”
Industry experts welcomed the Bank of England’s stress test.
“The Bank of England’s launch today of a system-wide exploratory scenario exercise focused on private markets will provide valuable insights into how the private markets ecosystem functions under stress,” said Antonello Aquino, a managing director at Moody’s Ratings and EMEA head of private credit.
“This initiative enhances transparency, which is credit positive, and demonstrates the commitment of private market participants to collaborate in a comprehensive stress test. In the UK, banks’ exposure to private asset funds and private equity-owned companies accounts for a relatively modest share of wholesale exposures – just eight per cent – with the majority consisting of secured facilities where loss rates have historically been negligible.”
