The Bank of England (the Bank) has designed a so-called ‘Contingent Non-Bank Financial Institution Repurchase Agreement Facility’ (CNRF).

It is a bailout facility for Non-Bank Financial Institutions, and two types are specifically named: pension funds and ‘LDI funds’.

The CNRF is an admission of failure, indeed an admission of the repeated bungling whereby the Bank, together with its global peers, has invited any Tom, Dick and Harry into financial markets, to spin a big wheeel and to blow up, and to take the financial system down with them.

The new financial system in action is what we saw in the week of 19th September 2022 when the gilts market went into a meltdown, thanks primarily to the extreme risk-taking indulged in by UK defined benefit pension funds through a financial instrument called a Liability-Driven Investment or ‘LDI’, hence the target market for the CNRF including pension funds and LDI funds.

The secondary cause was the existence of the seed bed for the meltdown. This seed bed resulted from twelve blunders by the Bank of England, enacted either alone or fashioned by it in conjunction with its global peers, that produced a casino-like financial market, to a much greater degree than the one that existed prior to the Global Financial Crisis.

You can download our full analysis here.

The twelfth blunder is the failure to anticipate the need for the CNRF at the time the other eleven were fashioned: the introduction of the CNRF now is an admission of the veracity of the other eleven.