The upcoming Bank of England stress exercise will involve several private-capital companies, such as Blackstone, Apollo Global Management, and KKR.

This exercise is designed to assess the potential reaction of the private-credit sector in response to a substantial financial shock. Described as a comprehensive scenario, it is slated for the following year and will encompass not only private-credit providers but also banks, insurers, and pension funds.

The initiative comes after an increased regulatory focus on the private credit market due to its rapid expansion and vulnerabilities, particularly in light of recent failures like those at US auto-parts company First Brands. Regulators are exploring parallels with past financial crises to gain a clearer understanding of how shocks in non-bank lending can impact the broader financial system.

Expected Broader Involvement

In addition to Blackstone, Apollo, and KKR, Ares Management is also reported to be participating. The Bank of England will release more details later on which private-credit providers are involved and what scenario parameters will be tested. According to a source familiar with the project, the authority might delay additional information until closer to its semi-annual financial stability report.

The BoE conducted its first comprehensive market-wide stress test in 2024, concentrating on how significant declines in bond markets would affect major non-bank financial institutions. This exercise underscored the importance of monitoring the resilience of companies outside traditional banking sectors, particularly those providing highly leveraged or opaque forms of credit.