The Bank of England has launched its second System-Wide Exploratory Scenario (SWES) exercise to examine how the private markets ecosystem would operate under stress and what that could mean for UK financial stability and the UK real economy. The exercise aims to close critical data gaps and assess how banks and non-banks active in private market finance might respond to a severe but plausible global downturn, including whether their collective actions could amplify stress and disrupt the provision of finance to UK companies. The SWES will run in two rounds to capture system-wide interactions, including by updating firms on the behaviours of other participants and testing key sensitivities. Participants include traditional and alternative asset managers, large banks that provide credit to private market funds and private equity-sponsored corporates, and institutional investors supplying capital. Alternative asset managers that have agreed to participate account in aggregate 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% of employment in UK private equity-sponsored corporates over the past three years. The exercise is conducted under the guidance of the Financial Policy Committee and the Prudential Regulation Committee, with full support from the Prudential Regulation Authority, the Financial Conduct Authority and The Pensions Regulator, and it will not publish firm-specific results; the focus is system-wide resilience of private market and related public market finance, including via leveraged loans and high-yield bonds. Most of the work will be completed in 2026, with an update during 2026 and a final report in early 2027 setting out aggregate findings, sector-specific findings where relevant, and implications for UK corporate financing markets and the Bank’s assessment of risks. The Bank will publish the full list of participants and details of the stress scenario in 2026.
Bank of England 2025-12-04
Bank of England launches second system-wide exploratory scenario focused on private markets under stress
The Bank of England has launched its second System-Wide Exploratory Scenario exercise to assess the resilience of private markets under stress and implications for UK financial stability. Involving asset managers, banks, and investors, it focuses on their response to a severe global downturn. Supported by regulatory bodies, the exercise will conclude with a report in early 2027, detailing findings and implications for UK corporate financing markets.