Bank of England calling for global action after near collapse of pension fund

The Bank of England on Tuesday called for “urgent international action” from regulators on non-bank financial institutions after it was forced to rescue U.K. pension funds in September.
When the central bank intervened in the long-dated bond market, a number of pension funds were hours from collapse. After a series of massive moves in interest rates on U.K. government debt exposed vulnerabilities in liability-driven investment (LDI) funds, which are held by U.K. pension schemes, it came.
The Bank said that if it had not acted, “the stress would have significantly affected households’ and businesses’ ability to access credit.”
Its temporary emergency bond-buying program ensured the country’s financial stability by allowing LDI funds time to shore up their liquidity positions.
“There is a need for urgent international action to reduce risks in non-bank finance,” the bank emphasized the need for regulators across jurisdictions to strengthen the resilience of the sector.
In order to better understand and mitigate the associated risks, the central bank said it will begin an “exploratory scenario exercise” focused on non-bank financial institutions.
“A number of improvements need to be made to the resilience of this sector to make it more robust,” the Bank concluded.
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“This necessitates regulatory action to preserve the increased resilience of LDI funds.” Further work will be done next year, and some steps have already been taken.