Bank of England
Many pension funds were just hours away from collapse after the Central Bank intervened in the long-dated bond market.
The Bank stressed the need for regulators across all jurisdictions to increase their sector’s resilience, stating that “there is a need for urgent international action to reduce risks in non-bank finance.”
LONDON — – The Bank of England on Tuesday urged “urgent international action” from regulators of non-bank financial institutions following the time it was required to help the UK pension fund during September.
A variety of pension funds were in danger of collapse as their central Bank intervened in the bond market. This came in the wake of a series of massive changes in interest rates for UK government debt-exposed risks in liability-driven investments (LDI) funds that are owned in UK pension schemes.
In its most recent report on financial stability released Tuesday, the Bank declared that had it not taken action, “the stress would have significantly affected households’ and businesses’ ability to access credit.”
Its temporary emergency bond-buying program gave LDI funds to build its liquidity and help ensure the country’s financial stability.
The Bank stressed the need for regulators across all jurisdictions to increase the sector’s security. They said, “there is a need for urgent international action to reduce risks in non-bank finance.”
The central Bank has announced it will start with an “exploratory scenario exercise” focused on non-bank financial institutions to be better aware of and minimize the risk.
“The resilience of this sector needs to be improved in several ways to make it more robust,” the Bank concluded.
“This is why it is necessary to take regulation to ensure that LDI funds can maintain their higher amounts of resilience. A few steps have already been taken, and more work is expected to be completed next year.”
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