Central Bank of Ireland introduces macroprudential measures for Irish-authorised GBP-denominated LDI funds

What Changed

• The framework establishes the following core requirements for in-scope GBP-denominated LDI funds: Yield Buffer Requirement
• Minimum resilience threshold of 300 basis points increase in UK yields
• CBI clarifies this is a minimum floor, not a target; funds may prudently maintain higher buffers
• Assets must be sufficiently liquid under both normal and stressed market conditions Yield Buffer Composition Rules
• "External assets" or "third-party assets" cannot be included in the yield buffer
• Non-UK rate-sensitive assets included in the buffer require appropriate risk assessment and regular resilience testing against simultaneous shocks

Suggested Considerations

• *For Existing Fund Managers (by 29 July 2024):
• *Audit & Classification: Determine whether each fund falls within the regulatory scope by assessing whether the investment strategy matches asset sensitivity to UK interest rates/inflation against pre-defined investor liabilities
• *Yield Buffer Assessment: Calculate current yield buffer position and identify any shortfalls against the 300 bps minimum threshold
• *Portfolio Restructuring: If necessary, rebalance portfolios to achieve and maintain the 300 bps yield buffer, ensuring:
• Removal of external/third-party assets from buffer calculations
• Verification that non-UK rate-sensitive assets are appropriately risk-managed

Key Dates

Who is Affected