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Andrew Hauser sets out the Bank’s ambitious plans for tackling systemic risks in market-based finance by developing a new lending tool for non-bank financial institutions, starting with UK insurance companies and pension funds, including newly-resilient LDI funds. The tool, which will require the support of market participants and regulators, will be designed to address dysfunction in core sterling markets in the exceptional circumstances where there is a threat to UK financial stability. It will not absolve firms of their responsibility to maintain robust self-insurance – indeed firms’ ability to access the facility, and the terms they face, will depend on their level of resilience.
A journey of 1000 miles begins with a single step: filling gaps in the central bank liquidity toolkit
