According to Andrew Hauser, executive director of markets at the Bank of England, the central bank intends to create a permanent system for lending to non-bank financial institutions (NBFIs) during stressful times, such as insurers and pension funds.

The central bank’s present toolset, which has historically concentrated on lending only to banks who subsequently lend to other financial institutions, needs to be immediately amended, he said.

The Financial Times reported that Hauser made reference to the market turmoil brought on by the pandemic in 2020 and the crisis in the government bond market last year, which was sparked by the « mini-budget » of the time’s Prime Minister, Liz Truss. Hauser claimed that recent events have demonstrated that banks cannot « stabilise the financial system as a whole » in times of crisis. According to the Bank of England, dangers from « non-bank financial institutions » will only grow in the upcoming years.

source: ft.com