BoE urges lenders to prevent repeat of pensions market turmoil
The Bank of England is pushing lenders to do more to prevent a repeat of the pension funds crisis in September, unleashed after the former chancellor Kwasi Kwarteng unveiled his tax-cutting “mini” Budget.
The fiscal plan, delivered on September 23 and subsequently ripped up by new chancellor Jeremy Hunt, triggered a sharp fall in UK government bond prices and a wave of cash calls for pension funds that had been using derivatives to manage their risk.
In the wake of the announcement, banks helped to ease the market turmoil by working with the BoE to channel liquidity to pension funds that needed it to prop up their investment strategies.
Breeden said global finance watchdogs also had a role to play in reducing the risk from non-bank financial institutions, a category that spans hedge funds to insurance companies.
“The UK’s recent experience is a timely reminder of the risks here,” she said, urging greater sharing of data internationally that would enable supervisors to identify risks on their patch more clearly.
Separately, Richard Lloyd, chair of the Financial Conduct Authority watchdog, told a Treasury select committee on Monday that the pensions crisis had also raised questions about the nature of cross-border fund operations.
This story originally appeared on: Financial Times - Author:Tax Cognition
