The deficit in one of Ireland’s largest pension funds has increased by €700m in the wake of the European Central Bank’s programme of quantitative easing (QE).

Bank of Ireland (BoI) said that, despite a 10% increase in asset value, up from the €6.5bn reported at the end of December last year, the fund’s deficit nevertheless increased.

According to the company’s most recent annual report, liabilities for the Bank of Ireland Staff Pension Fund (BSPF) – employing a discount rate of 2.2% and inflation assumptions of 1.5% – stood at €7.5bn at the end of last year.

In an interim management statement, BoI said the impact of the central bank’s QE programme had resulted in a €700m increase, to €1.7bn, in the IAS 19 deficit.

However, the 80-basis-point drop in discount rates should have resulted in a nearly €1.3bn increase in liabilities.

The impact of QE would have been offset by lower than expected inflation.

The bank calculated in its 2014 annual report that, for every 10bps decrease in inflation, it would see liabilities fall €101m, compared with a €407m increase per 25bps decrease in the discount rate.

Industry association PensionsEurope recently warned that pension funds risked being “collateral damage” as further monetary easing policies were launched, and urged regulators to consider postponing valuations or being more lenient as deficits increased.

It echoed calls from the Irish Association of Pension Funds that pension regulation should be reviewed in light of the “artificial and unprecedented conditions” in bond markets.

However, the Pensions Authority has since insisted that it would not relax the funding standard applied to pension schemes in Ireland as it could give members and schemes a “false impression” the situation could be easily resolved.