BoE launches severe private markets stress test

On June 19, 2026 the Bank of England launched a system-wide exploratory scenario targeting the private markets ecosystem. The exercise marks the first time the central bank has designed a dedicated stress test for this part of the financial system, which it describes as a $16 trillion market. The initiative reflects a desire to understand how this large but less transparent segment might respond to a sharp downturn and how that response could affect wider financial stability.

The project is structured as a year-long deep-dive. It begins with firms modelling their behaviour and exposures under a common adverse scenario and will culminate in feedback and a repeat of the exercise. The approach is exploratory rather than predictive, focusing on potential vulnerabilities and transmission channels rather than on producing firm-level pass-or-fail outcomes.

The hypothetical shock that participants must model is intentionally harsh. It assumes a 35% fall in global equity markets, representing a significant hit to asset valuations. In the UK, inflation is set at 7% and policy interest rates at 7%, conditions that would sharply tighten financial conditions and raise funding costs.

Alongside these financial variables, the scenario includes a 4% contraction in UK GDP. Such a decline would weigh on underlying corporate and household cash flows, with implications for private credit portfolios, private equity-backed companies and real assets. The combination of market, macroeconomic and rate shocks is designed to test both sides of private market balance sheets: asset values and liability structures.

More than 40 firms have agreed to take part in the exercise, signaling broad engagement across the sector. This group includes 17 alternative asset managers, among them large global names such as Apollo Global Management, Ares, Bain Capital and KKR. Their participation brings a wide range of private credit, private equity and other alternative strategies into the analysis.

By involving both asset managers and their counterparties, the scenario aims to illuminate how stress in private funds might interact with banks and other intermediaries. It examines funding arrangements, potential margin calls, liquidity demands and how investor behaviour could amplify or dampen shocks within this network.

The Bank of England plans to share aggregated first-round results with participants by year-end. Firms will not receive institution-specific assessments, but rather system-level insights on how the sector behaves under the shared shock. This feedback is intended to help firms and authorities understand concentrations of risk and possible channels of contagion.

The scenario is scheduled to be run again early next year after the initial readout. Participants will have an opportunity to update their responses in light of the first results and any internal reviews they undertake. This iterative process is designed to refine the understanding of private markets’ resilience and the potential impact of stress on the wider financial system and real economy.