AMSTERDAM, Oct 19 (Reuters) – The DNB, the Netherlands’ central bank, has asked the country’s pension funds to conduct an asset review after turmoil in the UK sector, the UK said on Wednesday. a spokesperson for the issuing institute told Reuters, confirming information from the Financial Times.
The surge in bond yields in the United Kingdom following the presentation at the end of September by the government of a “mini-budget” providing for tax cuts and aid to households and businesses without details of their financing, had forced the country’s pension funds to quickly find cash to increase their guarantees.
Although Dutch pension funds make less use than their British counterparts of LDI (“liability-driven investment”), a financial product which makes it possible to earn money when interest rates interest rates are falling, some analysts believe that they are nonetheless vulnerable in the event of a massive sale of government bonds.
The DNB noted in its annual review of financial stability, published on October 10, that Dutch funds had sold 88 billion euros of investments in the first half of the year.
“When an interest rate hike takes place gradually, there is no liquidity risk,” notes the central bank, but it believes that a liquidity crisis cannot be ruled out. (Report Toby Sterling; French version Claude Chendjou)