Bank of England urges transparency: A senior official from the Bank of England emphasised the importance of shedding light on the $8 trillion global private equity sector, citing concerns over opaque leverage that obscures the risks it poses to financial stability, employment, and economic growth.

Executive Director Nathanael Benjamin emphasised the need for transparency in the private equity market, given its significant role in the real economy, particularly its contribution of around 250 billion euros ($309 billion) in funding to British businesses, particularly in sectors like software, communications, IT, and media.

The private equity sector has witnessed exponential growth, with assets under management soaring from $2 trillion in 2013 to $8 trillion in 2023. However, recent developments have raised concerns about potential disruptions in funding supply and systemic risks, especially amid rising interest rates and challenges in exiting PE fund investments.

Benjamin highlighted the Bank of England's intensified scrutiny of the sector, signalling a deeper examination of risks and potential regulatory changes. However, he emphasised the need for international cooperation to address these challenges effectively.

In response, the British Private Equity and Venture Capital Association (BVCA) underscored the sector's vital role in the UK economy, generating 137 billion euros in 2023, equivalent to 6 per cent of economic growth. BVCA Chief Executive Michael Moore reaffirmed the industry's resilience across economic cycles.

Benjamin stressed the importance of evaluating facts objectively before implementing regulatory changes, particularly considering the potential impact on inward investment by private equity, which would be closely scrutinized by the government. Any reforms in market-based finance would require international consensus among regulators to be effective.

(with Reuters inputs)