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Bank of England calls for urgent action on funds that nearly toppled UK financial system
By Julia Horowitz
CNN, New York
Wednesday, March 29, 2023
LONDON -- The Bank of England has called for urgent action to address a weak spot in the UK financial system as persistent worries about the global banking sector threaten to unleash fresh market turmoil.
The central bank said today that UK banks had enough financial resources to avoid shocks but the pensions regulator needed to move "as soon as possible" to increase the resilience of liability-driven investment funds.
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These "LDI" funds, which many UK pension schemes invest in, proved particularly vulnerable when the British bond market came under enormous strain following then-Prime Minister Liz Truss' disastrous budget six months ago. The Bank of England had to step in to avert a broader financial meltdown.
Financial stability is once again a top concern for investors and regulators around the world following the failure of Silicon Valley Bank in the United States earlier this month and the emergency rescue of Credit Suisse by Swiss banking rival UBS.
The Bank of England's Financial Policy Committee recommended that the pensions regulator, TPR, act quickly to specify "the minimum levels of resilience for the LDI funds and LDI mandates in which pension scheme trustees may invest."
This would allow them to withstand "severe but plausible stresses" in the UK government bond market and meet any calls to post collateral in an orderly fashion. ...
... For the remainder of the report:
https://www.cnn.com/2023/03/29/business/bank-of-england-pensions-risk/index.html
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