See Thirteen days in October: how central bank balance sheets can support monetary and financial stability − speech by Andrew Hauser 6. Market-based finance refers to the system of markets (eg equity and debt markets), non-bank financial institutions (including investment funds, hedge funds, pension funds and insurers) and infrastructure (such as central counterparties and payments providers) which, alongside banks, provide financial services to support the economy. See Assessing the resilience of market-based finance 7. See Financial Policy Summary and Record - March 2023 8. See Using leveraged liability-driven investment 9. A regulatory buffer is said to be usable if institutions are permitted to operate normally even if their regulatory ratios decline below it. See Emerging prudential lessons from the Covid stress - speech by Victoria Saporta 10. See Bank staff paper: LDI minimum resilience - recommendation and explainer 11. The 99.8th percentile of a 10-year look-back window of rolling five-day shocks. 12. This might be expressed as a 1-in-100 year (or 99.998th percentile) five-day shock. 13. See Looking through a glass onion: lessons from the 2022 LDI intervention − speech by Andrew Hauser 14. See Further guidance on enhancing resilience in Liability Driven Investment 15. See Using leveraged liability-driven investment 16. See Pension Schemes Act 2021  and Pension Schemes Act 2021  17. See Building financial market resilience: From diagnosis to prescription - speech by Jonathan Hall 18. See Investing in financial stability − speech by Sarah Breeden 19. Including, but not limited to, investment funds, hedge funds, pension funds and insurers.

[14] The guidance covers risk management, operational processes, and stress testing capabilities. The responsibility of ensuring the resilience of LDI funds lies not just with LDI managers. Pension schemes which invest in LDI products must also contribute to resilience. I’ve already spoken about pension schemes’ role in ensuring LDI managers can use their resilience as collateral by remaining invested in LDI funds as they do so. Beyond this, TPR has published guidance on the responsibilities of pension scheme trustees in ensuring LDI resilience. [15] Fred Berry, from TPR, will speak about this later this morning. Pension schemes should also have regard to the Government’s broader strategy[16] to ensure that defined benefit schemes (DB) schemes in the UK are sustainable, well-governed, and that scheme members achieve better outcomes. The government is in the process of encouraging DB scheme trustee boards to more actively detect and respond to risks. Given the potential risks to financial stability from DB pension schemes, this work is essential. How can this framework enhance resilience in non-banks more widely? Now I would like briefly to change tack and think about whether our approach to LDI funds’ resilience might also be relevant when considering the appropriate resilience of other non-banks whose activities can impact UK financial stability. As non-banks play a greater role in the financial system[17] as well as the real economy[18] we will  Page 6  continue to ask questions on the resilience of non-banks[19] so that they absorb rather than amplify shocks. What vulnerabilities have we identified?