The Bank of England has raised concerns over a potential sharp repricing of private equity valuations in light of a difficult fundraising environment for the sector due to higher interest rates, and rising default rates on debt linked to private equity. 

"The extent of transparency around asset valuations, overall levels of leverage and the complexity and interconnectedness of the sector make assessing financial stability risks difficult and mean that risks need to be managed carefully, both by those in the sector and by their counterparties," it said. 

The warning follows concerns in recent months about the challenges in assessing the financial stability risks posed by private credit vulnerabilities in a higher interest rate environment. 

In its latest financial stability report, the Bank of England argued private credit and leveraged finance, which have roughly doubled in size in the last decade, appear "particularly vulnerable" to "sharp revaluations".