LONDON, June 19 (Reuters) - The Bank of England has launched its first system-wide liquidity 'stress test' to establish how big banks, insurers, clearing houses and investment funds respond collectively during extreme stresses in markets, it said on Monday.
The BoE had said in December that investment funds and other non-bank financial institutions would face their first 'stress test' to apply lessons from the near-meltdown in Britain's pension fund sector in September.
Liability-driven investment (LDI) funds, used by pension funds to ensure their long-term payouts, struggled to meet collateral calls after turmoil caused by the fiscal plans of Liz Truss's short-lived government in September.
Money market funds also came under "dash-for-cash" pressure during market stresses following economy lockdowns to fight COVID-19 in 2020.
"The exercise is not a test of the resilience of the individual firms participating.
Persons:
The BoE, BoE, Jon Cunliffe, Liz Truss's, lockdowns, COVID, Huw Jones, Emma Rumney, Kirsten Donovan
Organizations:
Bank of England, Money, Thomson