LONDON (Reuters), Britain should give ‘non-banks access’ to its repurchase agreement and government bond operations, as a way of supplying liquidity in troubled markets. The International Monetary Fund made Tuesday this recommendation.

Hedge funds, mutual funds money market funds and other non-banks now make up half of the global financial industry.

Like its counterparts in America and Europe, the Bank of England injected liquidity to markets when economies were in lockdown March 2020 in order to combat COVID-19. This created a “dashfor cash”.

Although intervention was able to stop money market funds and market participants freezing up from happening, global regulators are now looking at how to make sure that this does not happen again.

In a review of Britain’s financial system and economy, the IMF stated that this is a significant cross-border problem.

According to the IMF, “Meanwhile, the authorities should reinforce backstops to ensure that core markets function in times stress” and suggested that they consider opening repo/gilt purchasing operations to appropriately regulated, large-scale, non-bank financial intermediaries.

These operations are already available to banks.

‘MAJOR STRIDES’

According to the IMF, the British financial cycle was slightly ahead of that in the economy. It recommended continuing “assiduous macroprudential supervision”

It welcomed Monday’s BoE decision to mandate banks to increase their capital buffers for “rainy days”, and added that Britain had “made major strides in the establishment of its post-Brexit financial system frameworks.”

It stated that the UK was completing a review of its post-Brexit financial regulation framework. “It will be crucial to maintain the primacy in financial stability objectives, and protect the robust management domestic and cross-border financial sector systemic risk risks.”

The UK’s Finance Ministry has suggested that UK regulators should have the objective to maintain the sector’s competitiveness. This was in response to concerns raised by the BoE.