BoE policymaker calls for stress testing to go beyond banking sector
A Bank of England (BoE) policymaker has called for bank stress testing to extend beyond the banking sector.
Speaking at the European Central Bank’s stress testing conference in Frankfurt, Donald Kohn said that the bank was looking at opening up stress testing to hedge funds and open-ended funds.
Stress tests are used by the BoE to assess the health of UK banks, building societies and insurers.
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Kohn, who is an external member of the Financial Policy Committee, said: “What keeps me up at night is drawn from my experience of not seeing the build-up of risks prior to the GFC, so much of which involved risky and opaque intermediation away from banks.”
The calls follow the collapse of star stock picker Neil Woodford’s open-ended fund last year, which prompted the Financial Conduct Authority (FCA) to examine how funds manage liquidity risk.
Woodford’s flagship Equity Income Fund was gated in June last year following a run of redemptions, leaving investors unable to withdraw their cash.