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The Financial institution of England will perform a primary of its sort stress take a look at of vulnerabilities in non-bank monetary markets subsequent yr, after September’s implosion of UK pension funds uncovered gaps in policymakers’ understanding of systemic threat in key markets.
The BoE introduced the train in its newest monetary stability replace, the place it famous that whereas UK households are being “stretched” by rising rates of interest and hovering inflation, they weren’t but displaying “widespread indicators of economic difficulties” or an lack of ability to repay loans.
The UK’s company sector and banks have been each described as nicely positioned to face up to the worsening financial outlook, with the non-bank monetary sector coming in for probably the most extreme warnings from the senior financial institution officers and exterior consultants who make up the Monetary Coverage Committee.
The FPC mentioned worldwide regulators must “urgently . . . develop and implement applicable coverage responses” to tame threat stemming from non-bank monetary establishments, whose share of the worldwide monetary companies market has greater than doubled because the 2007-08 monetary disaster.
Within the meantime, the BoE is planning a world first — a “deep dive into particular dangers” into monetary markets dominated by establishments akin to hedge funds, mutual funds and pension funds in order that policymakers can assess the size of dangers “and suggest options”.
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