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

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  • Paul M.W. Tucker

    (Mossavar-Rahmani Center for Business and Government, Harvard Kennedy School, Harvard University, Cambridge, Massachusetts, USA)

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.

Suggested Citation

  • Paul M.W. Tucker, 2024. "Britain's Liability-Driven Investment Episode Was a Canary No One Elsewhere Bothered to Think About," Annual Review of Financial Economics, Annual Reviews, vol. 16(1), pages 253-271, November.
    • Handle: RePEc:anr:refeco:v:16:y:2024:p:253-271
    DOI: 10.1146/annurev-financial-082123-110030
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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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