UK Lawmakers Urge New Powers for Bank of England to Probe Private Market Risks

LONDON – A cross-party committee of British lawmakers has urged the government to consider granting the Bank of England new powers to collect data from the fast-growing but opaque private equity and private credit sector, warning that gaps in oversight could leave regulators ill-prepared to respond to future financial stress.

In a report published on Friday titled Private Markets: Gaps in Transparency, a House of Lords committee said there is currently insufficient information to determine whether the expansion of private markets poses a systemic risk to the UK financial system. Lawmakers added that although private markets are estimated to total around $16 trillion globally, they operate with significantly fewer disclosure requirements than traditional banks.

The committee welcomed the central bank’s decision to launch its first industry-wide stress test examining private markets, but cautioned that the exercise—largely dependent on voluntary participation—may not provide a complete picture of potential vulnerabilities.

Data gaps and oversight limits

If the stress test fails to deliver adequate insight, the committee recommended that the government ensure the Bank of England has clear legal authority to compel data collection from private credit firms. Lawmakers said this should focus on improving visibility into the scale of the market and its links to the broader financial system, rather than imposing new regulatory rules.

The report stressed that the aim is information gathering, not direct regulation. Better data, it argued, would allow regulators to identify emerging risks earlier and respond more effectively if market conditions deteriorate.

A further challenge highlighted in the report is jurisdiction. Many private credit and private equity firms that lend to UK businesses are based overseas, limiting the reach of domestic regulators and complicating efforts to assess cross-border exposures.

The committee also called on the UK Treasury to place private markets higher on its policy agenda, citing recent signs of stress in parts of the U.S. private credit market as a reminder of how quickly problems can surface in less transparent areas of finance.

A Treasury spokesperson said the government has significantly increased its focus on non-bank financial institutions in recent years and will respond formally to the committee’s recommendations in due course. Final results from the Bank of England’s private markets stress test are expected in early 2027, though lawmakers have asked for preliminary findings to be shared earlier.

While the inquiry did not uncover evidence that private markets are currently causing harm to the UK financial system, the committee warned that limited transparency itself represents a risk. Without better data, it said, authorities may struggle to act decisively if conditions worsen.

Brief Summary

UK lawmakers have called on the government to consider giving the Bank of England stronger powers to collect data on private equity and private credit markets if current stress tests fail to reveal sufficient detail. A House of Lords report warns that limited transparency in the $16 trillion global private market sector could pose risks to financial stability, even though no immediate threats have been identified.

Frequently Asked Questions (FAQs)

Q1: Why are lawmakers concerned about private markets?

Private credit and private equity have expanded rapidly but operate with limited disclosure. Regulators are concerned that without better data, risks could build unnoticed and potentially spill over into the wider financial system.

Q1: What powers does the Bank of England currently have?

The Bank of England monitors financial stability but cannot compel all private market participants—many of which are overseas—to provide detailed information.

Q2: What new powers are being proposed?

Lawmakers are suggesting information-gathering powers that would allow the Bank to require data from private market firms if needed, without introducing new regulation.

Q3: What is the private markets stress test?

The Bank of England is assessing how private equity and private credit firms might cope with a severe economic shock and how stress in those markets could affect the broader system.

Q4: Are private markets being blamed for current financial problems?

No. The committee said it found no evidence of current harm, but warned that a lack of transparency could delay responses if risks emerge in the future.