Bank of England to stress test hedge funds and private equity lending

Central bank to examine shadow banking sector amid fears it could put UK financial stability at risk

Hedge fund and private equity lending will be scrutinised by the Bank of England in the world's first stress test of the shadow banking sector, amid fears the underregulated industry could put the UK's financial stability at risk.

The tests are meant to help the Bank understand the weaknesses within, and risks posed by, non-bank lenders including hedge funds and money market investment funds, a sector that has doubled in size since the 2007-08 financial crisis and accounts for about half of the loans currently issued to companies globally.