Britain's Liability-Driven Investment Episode Was a Canary No One Elsewhere Bothered to Think About

Paul M.W. Tucker ()
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Paul M.W. Tucker: Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School, Harvard University, Cambridge, Massachusetts, USA

Annual Review of Financial Economics, 2024, vol. 16, issue 1, 253-271

Abstract: Britain's liability-driven investment crisis in fall 2022 had lessons for other major financial centers that, as evidenced by the US and Swiss banking crises only a few months later, were largely ignored. They are still relevant. In this article, I first discuss what drove the British crisis before identifying lessons for the microregulation of pension funds; for financial stability policy on shadow banking and beyond; for central banking balance sheet regimes, including lending of last resort and market making of last resort; and for monetary policy when fiscal policy makers sit on their hands.

Keywords: shadow banks; banking crises; political economy; central bank; financial stability; market maker of last resort (search for similar items in EconPapers)
JEL-codes: G23 G28 H12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1146/annurev-financial-082123-110030

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