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Edge England should take the collapse of two US companies “very seriously” amid concerns over the private finance sector, Andrew Bailey has warned.
The central bank governor also confirmed that the bank is planning to run a “stress test” with private equity and credit firms in a House of Lords committee.
Meanwhile, the Bank’s deputy governor Sarah Breeden suggested there were some “parallels” with the early days of the 2008 global financial crisis.
The caution comes after the collapse of US auto parts firm First Brands and car dealer and lender Tricolor.
The decline has raised concerns that global private debt markets are too active in lending at high interest rates, with fears that this could result in further declines.
Mr Bailey told the Lords Financial Services Regulation Committee that policymakers need to consider how systemic these incidents may be.
He said: “I think the big question today is: Are these cases unknown, or are they what I call the canaries in the coal mine?
“In other words, are they telling us something more fundamental about the private finance and private wealth sector?
“I think it’s still a very open question in America. I think it’s a question we have to take very seriously.”
Meanwhile, Ms Breeden, the bank’s deputy governor for financial stability, said the bank will take part in detailed testing to assess how strong personal finances are currently.
“We can see vulnerabilities here, opacity, leverage, weak underwriting standards, interconnectedness,” he said.
“We can see parallels with the global financial crisis.”