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Mar 27, 2024

The Bank of England is currently investigating the potential impact on funding for UK businesses if there is a reversal of the long-standing private equity boom. Officials have expressed concerns about issues such as leverage, transparency, and valuations in private markets. The BoE’s financial policy committee, which is responsible for monitoring risks to financial stability and implementing policies to mitigate them, has stated that the risk environment is challenging. They have also noted that there is an increased likelihood of a sharp correction in some markets, as prices continue to rise despite uncertainty in the economic outlook.

According to officials, there could be particular vulnerability in funding for riskier corporates in the event of a significant deterioration in investor risk sentiment. This includes private equity firms that are facing higher borrowing costs, as well as UK companies that rely on them for funding. The BoE has promised to conduct further research on the connections between private equity firms and the companies they fund, as they work to address potential vulnerabilities in the financial system.

By editor

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