European pension funds should have access to a central bank-backed facility as a last resort to help them avoid the fire-sale of assets forced on UK pension managers, the derivatives industry’s main trade body has said.
The International Swaps and Derivatives Association (Isda) on Wednesday called for a system that would allow pension funds to more easily convert their excess collateral into cash in order to meet margin calls from clearing houses.
It comes as officials in Europe assess the implications of the UK’s pensions and bond market chaos last month, when Westminster’s “mini” budget prompted a financial crisis. The sharp and unexpected surge in gilt yields following the announcement of unfunded tax cuts triggered margin calls on derivatives for pension funds, which they met by selling assets into a falling market.