More work is needed to tackle risks outside the banking sector, according to a Bank of England study which found that a market crisis would be amplified by fire sales of assets by pension funds, hedge funds and other investors.
The BoE said a sharp rise in sovereign and corporate bond yields caused by “a sudden crystallisation of geopolitical tensions” would cause “significant losses” for non-bank institutions — such as pensions funds, hedge funds and private equity firms — forcing many to sell assets and amplify the shock.
The exercise required a group of more than 50 City of London institutions to model how a period of intense stress would ripple through the increasingly important non-bank sector. It underlines how regulators are shifting their focus to the vulnerabilities in the financial system arising from outside the banking system.
https://archive.is/20241129131907/https://www.ft.com/content/139a0862-1d14-44c7-87a9-fab6a860032d
https://www.ft.com/content/139a0862-1d14-44c7-87a9-fab6a860032d
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