What is the Bank of England's new stress test for?

The Bank of England's new stress test is for the shadow banking industry, a market valued at $11 trillion.

Which financial groups are involved in the BoE stress test?

Major financial groups like KKR, Blackstone, Apollo, and Goldman Sachs Asset Management are participating.

Why is the Bank of England stress testing shadow banks?

The Bank is stress testing shadow banks due to their enormous growth and less transparent nature compared to traditional banking, amidst fears of systemic risks.

Home / Business and Economy / BoE Probes $11 Trillion Shadow Market

BoE Probes $11 Trillion Shadow Market

6 Dec

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Summary

Bank of England launches stress tests for the shadow banking sector.
Major financial groups like KKR and Blackstone are participating.
The test will assess impact of crisis on UK and its financial system.

The Bank of England is launching a crucial stress test for the shadow banking sector, a market valued at $11 trillion. This initiative comes amid concerns about potential hidden risks, with major financial groups such as KKR, Blackstone, and Apollo agreeing to participate in the rigorous assessment. Officials aim to understand the systemic impact of a severe economic crisis.

The system-wide exploratory exercise, scheduled for next year, will deliver its findings in 2027. The decision to subject private equity and credit firms to such tests reflects their substantial growth, expanding from $3 trillion to $11 trillion in assets over a decade. In the UK, these firms employ a significant portion of the private sector workforce and are involved in a large share of corporate debt.

Recent collapses of companies heavily reliant on private credit have heightened fears of broader market instability, echoing warnings of unseen dangers. The Bank's action seeks to bolster financial stability by scrutinizing this less-regulated sector, aiming to mitigate risks that could affect broader economic growth and employment.