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BoE deputy says Woodford suspension is crucial to prevent asset fire sales

by LLB Reporter
11th Jun 19 1:57 pm

According to the deputy governor of the Bank of England Neil Woodford is right in blocking investors from withdrawing from their funds to prevent asset fire sales.

MPs at the Treasury Select Committee asked Ben Broadbent, the deputy governor for monetary policy over the suspension of funds, he said Woodford Investment Management must not be banned for suspending funds.

He said, “To be clear, suspensions are allowed.

“Fundamentally, if you have got a fund whose assets are less liquid than their liabilities, there will be episodes when that’s probably the right thing to do.

“I don’t think we should see this as an adherent problem or something we should get rid of.”

Broadbent said there could be wider financial stability risk in the UK if funds were forced to sell off their investments below market price.

He made it clear, “That’s precisely what suspensions are designed to prevent.”

He stressed that investors understand that suspensions are a possibility that can see them blocked from accessing their money.

He said, “There might be a question about whether investors are sufficiently aware of these risks.”

When he was asked over regulatory supervision over Woodford’s fund, he told MPs, “You cannot have a system where regulators collectively could reduce all risk to zero.

“I don’t think that’s possible or desirable. There is risk in these funds.”

Speaking on the suspension of Woodford’s fund he said, “There are no rules broken, so far as I understand it.”

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