It is for staff at the UK authorities to calibrate a range of holdings of liquid assets maturing within a week that would address financial stability risks from MMFs. However, it is easy to see how the illustrative scenario I talked you through earlier could be used to calibrate the appropriate resilience of MMFs. MMFs could have a range of holdings to reflect idiosyncratic and systemic risks. These holdings could be calibrated according to observed historical outflows, as seen in the dash for cash and LDI stress events. And as discussed in the discussion paper, the usability of these holdings will also be a key consideration for the UK authorities. Conclusion The FPC have recommended a framework for the steady-state resilience of LDI funds, built over three building blocks: baseline resilience, systemic resilience, and fund specific additional resilience. The first two building blocks amount to a 250 basis point minimum. And the framework also requires pension schemes to put in place operational processes enabling them to deliver collateral within five days and to support LDI funds in drawing down during stress. This framework provides us with a suitable framework for addressing non-bank vulnerabilities more generally. We can use this framework to contain non-bank vulnerabilities and so to mitigate their financial stability impacts. But this is a conference for pension funds, so I will leave on a message to the experts at this conference. Ensuring financial stability is not only a job for financial stability authorities and regulators such as TPR, but also for participants.

[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?