About this episode

Sarah Breeden discusses the risks of private credit and its implications for the global financial system.

Sarah Breeden, Deputy Governor of the Bank of England for financial stability, joins Big Boss Interview to discuss risks in the global financial system, the rapid growth of private credit, and whether markets are prepared for the next economic shock. She tells BBC Business Editor, Simon Jack the private credit market has grown to around $2.5 trillion in less than two decades, and says the BoE is watching the sector closely. She warns it has “never been tested at this scale” and that aspects of the market carry echoes of the period leading up to the 2008 financial crisis — including rising leverage, complex interconnections between funds, insurers, pension schemes and banks, and limited transparency compared to traditional lending. There are already signs of strain. Investors have begun pulling money out of some funds, while others have been gated or marked down. Breeden warns this could lead to what she describes as a “private credit crunch”, where companies reliant on this form of financing may struggle to refinance their debt. While distinct from a banking-led crisis, she says the consequences for the real economy could still be significant. At the same time, she highlights a…

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