BoE launches scenario phase of SWES on private markets

The Bank of England (BoE) has announced the scenario phase of its second system wide exploratory scenario (SWES), this time focused on private markets. The BoE has issued participants with a hypothetical stress scenario that details a severe, but plausible, global macro-economic recession over a five-year period. The severity of this shock has been calibrated to represent a tail-risk outcome for the global economy and is broadly consistent with the severity of other stress tests run, such as the bank capital stress test. The exercise aims to assess whether vulnerabilities in private markets could have systemic implications and under what conditions. Conducted in two rounds, participants will model the impact of the scenario and their behavioural responses.

The exercise will examine vulnerabilities including leverage, valuation opacity, liquidity pressures, interconnectedness and deteriorating credit quality, as well as systemic transmission channels through which stress could spread to markets, institutions and the real economy. Following round 1, the BoE will provide aggregated feedback, allowing firms to update their responses. Initial findings will be published in the July Financial Stability Report, with interim results expected later in the year and a final report expected in 2027. A new webpage detailing the hypothetical scenarios to be used in the SWES was published on the same day.

Return to main website.