BoE has confirmed details of the hypothetical macroeconomic and financial market scenario to be used in the private markets system-wide exploratory scenario.
The scenario spans a 5 year window and envisages a severe but plausible global aggregate supply and geopolitical shock, which leads to a deep global recession. In summary, year 1 imagines that various stressors impact public and private markets, thereby causing a deep global recession in year 2, with global recovery progressing slowly in years 3-5.
The test aims to improve BoE’s understanding of how banks and non-banks active in private markets would respond to a severe but plausible global downturn.