Bank of England's Deputy Governor for Markets and Banking Dave Ramsden said on Monday that the United Kingdom's gilt markets "continue to function in an orderly way" but he warned about "vulnerabilities that could lead to system-wide risks," adding the BoE must carefully monitor them. He pointed to highly leveraged hedge funds and the concentration of the market within a subset of funds as risks to financial stability.
"The comparatively calmer market conditions of this year could lead to greater risk-taking in future," Ramsden cautioned. He said the BoE must stay vigilant regarding the "increasing uncertainty" around the economic outlook and use its balance sheet when needed. "Getting the balance right in our balance sheet operations should help us to maintain financial stability and, in doing so, lay the foundations for sustainable growth," he concluded.
