Bank of England might need new powers to assess private markets: lawmakers

[LONDON] British lawmakers are calling for the Bank of England (BOE) to be handed new powers to gather data on private credit, if a landmark stress test fails to shed enough light on risks posed by the fast-growing but opaque market.

In a report published on Friday (Jan 9), Private Markets: Unknown Unknowns, the cross-party House of Lords parliamentary committee said that there was insufficient data to determine whether the growth of private markets posed a systemic risk to the United Kingdom’s financial stability.

But it welcomed the BOE’s industry stress test.

It also urged the government to ensure that the central bank had the power to collect information about the scale, and the implications of the interconnections between the banking system and private credit, if needed.

“It’s an information gathering power, it’s not the same as regulating the industry,” said Sheila Noakes, a House of Lords member.

The central bank in 2025 launched its first stress test, of how the US$16 trillion global private equity and private credit industries would cope with a major financial shock, with results due in early 2027.

The parliamentary committee, which oversees financial regulators, is hoping for preliminary results to be made available.

Private credit is not directly regulated by the BOE, and the central bank cannot force all firms, many of which are based overseas, to take part in the exercise.

Clive Hollick, one of the committee members, also noted that private markets should be “top of the agenda” for the finance ministry, after the report raised concerns that the finance ministry did not have a “firm grasp” on the issue.

SEE ALSO

London’s FTSE 100 climbs to record high on energy, defence gains 

UK mortgage approvals fall to five-month low ahead of budget

British CFOs more optimistic that AI will boost their firms

“Given that there have already been some slip-ups in the US, this deserves a much closer, more active engagement,” he added.

A spokesperson for the finance ministry said that it has worked to “significantly increase” the focus on non-banks in recent years, and would respond to the committee’s report in due course.

The BOE has previously warned that the collapse last year of US car parts maker First Brands and auto dealership Tricolor could signal bigger financial problems ahead.

The report is the result of an inquiry by the House of Lords parliamentary committee that began in July, and heard evidence from the finance ministry, regulators, banks, trade associations and asset managers.

However, Hollick added that the committee had not come across any evidence that the market was already causing harm. “We neither smelt a rat nor saw a rat,” he quipped. REUTERS