A powerful House of Lords committee has urged the UK government to give the Bank of England (BoE) significantly enhanced powers to collect data from the fast-expanding private credit industry, warning that current blind spots could mask emerging threats to financial stability.

In a report titled Private markets: Unknown Unknowns, peers from across the political spectrum said regulators lack the information they need to assess whether the boom in private equity and private credit poses systemic risks to the UK financial system. The committee said the central banks existing tools and remit are not sufficient to capture the scale, leverage and interconnectedness of activity that has increasingly shifted from traditional banks into largely unregulated private markets.

Call for broader Bank of England remit

The Lords committee stopped short of asking for full direct regulation of private credit by the BoE, but called for new statutory powers allowing the central bank to compel firms to provide detailed data where necessary. Sheila Noakes, a member of the committee, stressed that the proposed changes are focused on information-gathering rather than expanding the Banks role into supervising the industry in the same way it oversees banks and insurers.

Peers argued that, without a stronger legal mandate, the BoE cannot reliably track exposures that may sit outside the regulated banking perimeter but could still transmit stress into the core financial system. Many private credit firms and funds are domiciled overseas and are under no obligation to participate fully in the Banks current information requests or stress-testing exercises.

Stress test highlights data gaps

The BoE launched its first dedicated stress test of the global private equity and private credit sector late last year, targeting a market estimated at around $16 trillion worldwide. The exercise is designed to assess how private market structures and funding models would cope with a severe macroeconomic or market shock, and how any resulting losses could spill over into banks, pension schemes and other investors.

Results from the stress test are not expected until early 2027, but the Lords committee said it wants to see preliminary findings sooner, given the pace of growth in private markets. Lawmakers warned that the voluntary nature of participation and the absence of full reporting requirements could limit the usefulness of the exercise unless the Bank is given power to demand more comprehensive data.

Warning shot for Treasury and regulators

Clive Hollick, another member of the Lords committee, said private markets should be treated as a priority by the Treasury, arguing that the finance ministry does not yet have a firm grasp of the potential systemic implications. The report pointed to episodes in the United States, including the collapses of firms such as First Brands and Tricolor, as potential early warning signs of wider vulnerabilities that could emerge if credit conditions tighten further.

The committees findings follow an inquiry launched in July, during which peers heard from the Treasury, regulators, banks, trade bodies and asset managers. While the report did not uncover clear evidence that private credit is currently causing harm to the UK financial system, it emphasised that the combination of opacity, leverage and cross-border complexity could turn into a serious problem if left unchecked.

Government response and industry implications

A spokesperson for the Treasury said the government has increased its focus on risks stemming from non-bank financial institutions and will respond formally to the committees recommendations in due course. Ministers have been keen to promote the UK as a hub for alternative finance and private capital, but the Lords report underlines the tension between competitiveness ambitions and the need to guard against hidden build?ups of risk.

For the BoE, additional data powers would mark a further evolution of its post-crisis macroprudential toolkit, expanding its ability to monitor activity beyond the traditional banking system. The central bank has repeatedly warned that non-bank financial intermediation, including private credit, is a growing source of potential instability and has called internationally for stronger oversight frameworks.

Private credit providers, which have benefited from banks retreat from parts of the corporate lending market, may face more intrusive information requests and greater scrutiny of their links to regulated lenders and UK investors if the recommendations are adopted. However, the Lords committee has framed its proposals as a pre?emptive transparency measure rather than an attempt to stifle the sectors growth.

With the UK seeking to attract more global capital and deepen its capital markets, the debate over how far to extend the BoEs reach into private markets is set to become a central question for policymakers. The committees intervention increases pressure on the government to decide whether the current light?touch approach to private credit can be sustained, or whether the lessons of past crises argue for earlier, data?driven action.