• BoE’s Bailey urges rapid global action to strengthen market-based finance
• Private credit flagged as opaque, fast-growing, and highly interconnected
• New BoE stress test examines system-wide spillovers from non-banks
• Focus is the economy, not firm-level solvency or micro-prudential metrics
• No trade-off between stability and growth, Bailey insists
• Political pressure mounts to loosen bank capital rules in UK and US
• BoE trimmed some capital buffers in December with offsetting safeguards
• Regulators likely to seek better data, transparency, and cross-border coordination

 Bank of England Governor Andrew Bailey has warned that private credit poses “a particular and urgent need” for stronger global safeguards, arguing that vulnerabilities in market-based finance could amplify the next bout of economic stress.

Writing in an article published on Tuesday by industry magazine The Banker, Bailey said market-based finance had become “very large and fast-growing” but remained opaque in key areas.

That opacity, he added, obscures complex cross-border linkages and makes it harder for authorities to see how risks might propagate through the system when conditions turn.

Bailey’s remarks accompany a new system-wide exercise launched by the Bank of England in December to examine how shocks could transmit through private equity and private credit.

Unlike traditional banking stress tests that scrutinise the health of individual lenders, this exercise is designed to assess broader macro-financial spillovers.

The focus, Bailey stressed, is on the economy-wide consequences rather than on the solvency of specific firms, many of which sit outside the BoE’s direct regulatory perimeter.

“The challenge now lies in managing risks that sit beyond the banking perimeter as well as identifying and understanding new interconnections between banks and non-banks,” he wrote.

The message underscores a widening shift among regulators since the global financial crisis: while banks are better capitalised and more liquid, the rise of non-bank intermediation has moved substantial credit creation into less transparent corners of the market.

Bailey also reiterated that policymakers should reject the idea of a trade-off between stability and growth.

In his view, durable expansion requires confidence in the plumbing of the financial system, particularly when credit cycles turn and funding conditions tighten.

The banking sector’s stronger resilience, he said, is “no reason to rest on our laurels.”

The governor’s warning lands amid a renewed political debate over prudential requirements.

In Britain, Chancellor Rachel Reeves has previously criticised heavy-handed regulation as a “boot on the neck” of business.

In parallel, the administration of President Donald Trump has considered easing capital rules for banks, sharpening questions over how far to recalibrate standards without reigniting systemic fragilities.

The BoE itself lowered some capital requirements in December for the first time since the crisis, arguing that other safeguards had been reinforced and that UK banks now play a smaller role in global markets.

Bailey’s system-wide lens suggests that any loosening for banks should be balanced by better visibility and loss-absorbing capacity where credit risk has migrated, notably in private credit funds and their financing chains.

As the central bank gathers evidence from its non-bank stress exercise, Bailey’s call sets the stage for a broader push among global regulators to tighten data, enhance stress-testing frameworks, and close gaps that could otherwise leave the real economy exposed when the cycle turns.