trending Market Intelligence /marketintelligence/en/news-insights/trending/h29tPM3ug7O4Awf7CajKxg2 content esgSubNav
In This List

BoE official: Review underway to address risks associated with open-ended funds

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


BoE official: Review underway to address risks associated with open-ended funds

A senior official of the Bank of England warned against scaling back postcrisis reforms and said regulators are working to deal with risks in open-ended investment funds to promote financial stability and make long-term investments more attractive.

Alex Brazier, executive director for financial stability strategy and risk at the U.K. central bank, said Sept. 2 that retracting financial regulations introduced after the 2008 financial crisis could prove harmful and costly for the economy. "We've balanced the benefits of our actions with the costs," he said. "So it would be harmful to swing back from here."

Meanwhile, regulators are conducting a review to better align open-ended investment funds' redemption terms with the liquidity of their assets, Brazier said. Open-ended funds offer speedy redemptions to investors. Such funds have more than doubled in size since the financial crisis and have invested increasingly in illiquid assets, according to the official.

Even the fund industry acknowledges that allowing speedy redemption is not a realistic approach for funds investing in highly illiquid assets, he said. Given the growth of these funds, which hold at least a quarter of the additional corporate bonds issued by U.K. businesses since 2008, these funds have potential to become a systemic issue.

In addition, Brazier said regulators will be stress-testing individual firms and the financial system for their resilience to climate risks.