Bank of England launches groundbreaking private credit stress test

The Bank of England regularly carries out 'stress tests' of the banking system

The Bank of England has launched its first ever stress test of the fast-growing private credit industry, in a bid to establish how the opaque sector would respond to a range of economic and financial shocks.

The undertaking, called a ‘system-wide exploratory scenario exercise (SWES)’, will work with some of the industry’s biggest players to war-game a host of market conditions, probing their plans for a downturn in economic conditions.

The test will also seek to unearth whether the collective behaviour of private credit firms – also known as non- or shadow banks – poses a system-wide threat to the wider economy, and seek to get a handle on the extent and manner of the industry’s relationship with tradition