The Bank of England is probing how badly funding for UK businesses would be hit by the reversal of a long-running private equity boom, officials said, as they escalated warnings about leverage, transparency and valuations in private markets.
The BoE’s financial policy committee, which monitors risks to financial stability and develops policies to offset them, said the risk environment “remains challenging” and the likelihood of a “sharp correction” in some markets had increased since December as prices rise despite a cloudy outlook.
“Finance for riskier corporates could be particularly vulnerable to a significant deterioration in investor risk sentiment,” officials wrote, as they vowed to carry out further work on the interconnections between private equity firms, facing higher borrowing costs, and the UK companies that depend on them for funding.
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