Pensions watchdog called in to emergency talks on UK market turmoil
The Pensions Regulator has for the first time been drafted into high-level emergency talks led by the Treasury and Bank of England as they examine measures to calm financial markets in the wake of the meltdown which followed Kwasi Kwarteng’s mini-budget.
The watchdog, which oversees the £1.5tn pension sector, is understood to have been summoned into closed-door meetings of the Authorities’ Response Framework (ARF), which are triggered when an “incident or threat” could cause major disruption to financial services in the UK.
Officials will now consider how to further respond to the meltdown that followed the chancellor’s speech and forced the Bank of England to intervene with a £65bn bond-buying programme in order to avoid a pensions crisis.
The secretive ARF was established in response to the 2007/8 financial crisis. It is meant to be a forum for top Treasury officials and key City regulators – the Bank of England and Financial Conduct Authority – to address threats to financial stability.
It is understood this is the first time the Pensions Regulator – led by industry veteran Charles Counsell – has taken part, highlighting the scale of the crisis that led to the Bank of England’s intervention.
Experts said that options likely to be considered by the forum include the creation of a “back-stop fund” – controlled by the Bank of England to cover larger-than-expected collateral calls. A ban on the use of risky financial products that have been blamed for magnifying last week’s crisis is also being examined.
Those products – known as liability-driven investments or LDIs – have been widely used by mostly final-salary pension funds managing more than £1.5tn in savings to help hedge against swings in the value of some of their
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