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Thursday, Nov 05, 2026

Bank of England gives lenders December deadline to improve data on risks

Bank of England gives lenders December deadline to improve data on risks

The Bank of England will decide by year end if tougher disclosure rules are needed for banks after the near meltdown in pension funds last September highlighted weaknesses in quantifying risks, it said on Tuesday.
Banks were exposed to liability-driven investment (LDI) funds, used by pension schemes to ensure payouts to pensioners.

The funds struggled to meet collateral calls when prices of the UK government bonds they hold crashed following the announcement by then Prime Minister Liz Truss of unfunded tax cuts.

Banks did not know the size of their exposures to pension fund counterparties, BoE executive director Victoria Saporta told parliament's Treasury Select Committee.

"There was no active counterparty risk management," Saporta said.

The BoE had to buy UK government bonds to help stabilise the market and take pressure off LDI funds and pension schemes, though the stability of banks was not under threat.

Ensuring banks can quantify exposures properly is a priority for supervisors this year for the BoE, she said.

"If supervision is not sufficient, then this will be thrown back to me and we might need to make some rules," Saporta said.

"If we find there are still weaknesses by the end of the year, then we will have to put the pressure up and increase the requirements in a particular area."

Regulators have already forced LDI funds to hold more liquidity to cope with any fall in bond prices.

The BoE's Financial Policy Committee is expected later this month to set out a tougher framework to regulate LDI funds over the longer term.

To be effective, international action may also be needed given the funds are listed in European Union centres such as Luxembourg and Dublin.
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