Latest news with #FinancialPolicyCommittee
Reuters
14-05-2025
- Business
- Reuters
Bank of England to seek feedback on gilt repo reforms, Breeden says
LONDON, May 14 (Reuters) - The Bank of England will start talking to players in the financial services industry about possible reforms to make sure the gilt repo market is resilient, BoE Deputy Governor Sarah Breeden said on Wednesday. The BoE's Financial Policy Committee said in November it wanted to strengthen the market which came under stress in 2022 when British government bond prices slumped following then prime minister Liz Truss's "mini-budget." "We will start a conversation with industry via a Discussion Paper later this year on possible reforms to market structure to enhance gilt repo market resilience," Breeden said in the text of a speech to the annual meeting of the international Swaps and Derivatives Association in Amsterdam.
Yahoo
10-04-2025
- Business
- Yahoo
Bank of England warns of increasing risks to financial stability
The Bank of England (BoE) has warned that heightened geopolitical tensions, including the repercussions of US tariffs, pose a threat to the stability of the financial system. 'A major shift in the nature and predictability of global trading arrangements could harm financial stability by depressing growth,' the BoE's Financial Policy Committee stated. It emphasised that global risks are especially relevant to the UK's financial stability, given the country's open economy and 'large financial sector.' The central bank further noted that the 'likelihood' and 'potential impact' of global shocks significantly affecting the UK's financial landscape had increased. 'The global risk environment has deteriorated, and uncertainty has intensified,' it said. The BoE particularly raised concerns about the effect of the tensions on private equity investments. Nevertheless, it noted that the UK banking system remains 'well capitalised' and that its resilience continues to be supported by 'strong' asset quality. According to the FPC, the UK banking sector has the ability to support both households and businesses, even if economic and financial conditions become significantly worse than currently anticipated. The BoE said it will continuously assess the UK banking sector's "resilience", including through the 2025 Bank Capital Stress Test launched last month that targets the top seven UK banks and building societies. This test replaces the previous Annual Cyclical Scenario (ACS) and is designed to evaluate the resilience of the banking sector under a hypothetical stress scenario involving declining asset prices, severe recessions, and rising global interest rates. These comments come in the wake of US President Trump's implementation of a reciprocal tariff policy, which rattled financial markets. Shortly thereafter, however, Trump announced a three-month pause on all reciprocal tariffs, except those affecting China. In a social media post, he stated that tariffs on China would rise to 125% from 104%, after China's retaliatory tariffs. "Bank of England warns of increasing risks to financial stability " was originally created and published by Private Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Sign in to access your portfolio
Bloomberg
09-04-2025
- Business
- Bloomberg
UK Regulators Eye Wall Street's Use of AI on Trading Floors
The Bank of England plans to closely monitor the use of artificial intelligence by banks and hedge funds over concerns that the technology could trigger a market crash or manipulation without humans even knowing about it. The central bank's Financial Policy Committee warned that the technology could destabilize markets or act in other adverse ways in a new report on AI published Wednesday. It added that AI was making such rapid headway among hedge funds and other trading firms that humans may soon not understand what the models are doing.
Yahoo
09-04-2025
- Business
- Yahoo
BOE Warns Risk of ‘Further Sharp Corrections' in Markets Is High
(Bloomberg) — The Bank of England said hedge funds have faced 'significant' margin calls from their prime brokers as they navigated extreme market volatility in the aftermath of US President Donald Trump's tariff announcements and warned that the risk of 'further sharp corrections' remains high. While the central bank's Financial Policy Committee found that so far those firms had been able to meet margin calls, it warned that the overall global risk environment has deteriorated, according to minutes from meetings it held on April 4 and April 8. 'Uncertainty has intensified,' the committee said. 'The probability of adverse events, and the potential severity of their impact, has risen.' Markets have gone haywire since Trump unveiled a raft of tariffs on trading partners around the world. Equity investors immediately headed for the exits, wiping out trillions of value. Markets continued to convulse this week, while the VIX Index, or fear gauge, rose to pandemic-era levels. The central bank spent months last year studying how a bevy of investment banks, insurers, central counterparties, hedge funds and other asset managers can handle different forms of stress as part of its so-called system wide exploratory scenario. It ultimately warned that hedge funds, asset managers and pension providers could be 'underprepared' in times of crisis. At its meetings, the committee noted that some hedge funds had de-risked their portfolios ahead of Trump's announcement last week, which meant they were less impacted by the volatility in markets. Still, the central bank flagged the risk posed by the rising use of leveraged investment strategies in UK government bond markets. Much of that recent increase could be explained by hedge fund net gilt repo borrowing, the BOE said, which rose from £4 billion at the start of 2024 to £61 billion as of March 2025. That's within the top percentile of the historical distribution of hedge fund net positioning, going back to 2017, it added. Hedge funds use repo markets to hold sovereign debt outright or to take positions relative to other asset classes, including the so-called basis trade that exploits the price difference of bonds and futures contracts. Market participants have speculated that wild swings in US Treasury prices over recent days are due in part to the unwind of basis trades. Gilts have also sold off heavily in the market ructions. 'Any forced or rapid unwinding of leveraged positions, particularly when concentrated, could amplify price shocks and create financial stability risks,' the committee said. Other central banks including the Bank of Canada and European Central Bank have also noted these risks. The central bank said it remains concerned about the prevalence of private equity-backed companies across the UK and how such ownership structures could hurt the country's economy during times of economic stress. Shares of the biggest private equity firms have plunged in the aftermath of Trump's tariff announcement. KKR & Co. and Ares Management Corp. both tumbled 15% — a record drop for both firms — the day after Trump unveiled the new policies. Apollo Global Management Inc., Carlyle Group Inc., Blackstone Inc. and Brookfield Corp. also all swooned. At the start of the year, private equity dealmakers were hopeful that Trump would usher in a frenzy of merger activity and initial public offerings. That would have been good news for buyout funds that have been patiently awaiting a window to exit many of their longtime investments. Trump's announcement last week has throttled that optimism, at least in the short-term. Already, high-profile companies including Klarna Group Plc and Stubhub Holdings Inc. have paused their initial public offerings. The BOE has long voiced concern about opaque valuation practices and governance risks in the private equity market, which now finances around 10% of the UK's private-sector jobs. 'Heightened global uncertainty and perceived higher economic risk could translate into tightened financing conditions for business, as well as impacting exit opportunities for investors in an already subdued IPO market,' the committee said. 'These vulnerabilities could amplify shocks to highly indebted UK corporates or investor confidence and potentially affect UK financial stability.' More stories like this are available on ©2025 Bloomberg L.P. Sign in to access your portfolio
