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Central Bank improves resilience of Irish-listed UK funds that sparked crisis in 2022

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Bank-Of-England

The funds at the centre of the move are called liability-driven investment funds. While they are typically managed from London, many of them are listed in Dublin and Luxembourg

Dublin- and Luxembourg-based leveraged liability-driven investment funds played a significant role in the financial turmoil following the UK mini-budget in September 2022has moved with Luxembourg authorities to bolster the resilience of a type of UK fund that ran into trouble in September 2022 and threatened the state’s pensions sector.

While plain-vanilla LDI strategies use bonds – which generate predictable interest income – to match their payout liabilities, a raft of UK pension funds had used high levels of leveraged financial derivatives through investments in LDI funds to increase their exposure to bonds they didn’t hold.Trump Media’s convenient complaint about short sellers

Under the new rules, Irish authorised sterling-denominated LDI funds must maintain resilience to be able to cope with a minimum of 3 percentage points of an increase in UK bond market rates, or yields. Luxembourg has also on Monday introduced a similar requirement for such funds, following engagement with UK regulators and the European and Securities Markets Authority .

Source: News Formal (newsformal.com)

Bank-Of-England

 

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