The UK’s House of Lords has criticised the Treasury for its “limited grasp” of private capital market risks, and has called on the Bank of England (BoE) to accelerate stress testing of the sector.

In its report, the Financial Services Regulation Committee highlighted the rapid growth and interconnectedness of private markets with banks and insurers as potential concerns for financial stability. While the inquiry could not determine whether private markets pose systemic risk, it found evidence of “passivity” from the Treasury in monitoring emerging threats.

Committee members stressed the urgency of understanding how private credit interacts with deposit-taking banks, insurers, and broader financial markets.

Furthermore, Lord Hollick warned of potential spillovers from the US.

The Lords urged the Treasury to clarify how it plans to regulate private markets, assess risks, and ensure credit affordability. Baroness Noakes called for the BoE to publish results from its stress tests by mid-2026, rather than 2027, to identify regulatory gaps and potential threats to financial stability.

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