MNI BRIEF: BOE Bailey Sees Higher Risks Of Sharp Market Moves
MNI (LONDON) - Changes in core financial markets in recent years, with non-bank institutions and short-term investment strategies more dominant, could create a new set of financial stability vulnerablities, Bank of England Governor Andrew Bailey said Tuesday
Bailey said that there was now a greater likelihood of jumps to illiquidity and large market moves that cannot be explained by fundamentals and that there was evidence of increased correlation in moves due to funds pursuing similar trading strategies. He said that the right response was not, necessarily, more regulation and the BOE has instead created new liquidity facilities and enhanced stress testing. (see MNI INTERVIEW: BOE Urges Signups For Non-Bank Gilt Facility).
In his speech at The University of Chicago Booth School of Business, Bailey concluded that "It is critical that we have and develop tools of assessment and intervention. But these interventions may not always need to be more regulation."