Dutch pension asset manager APG wants the European Central Bank (ECB) to act as an emergency liquidity provider on the repo market. The suggestion echoes a proposal made by PensionsEurope in March this year.

Pension asset manager APG wants the ECB to take an active role in safeguarding the reliability of the repo market, where pension funds swap collateral such as government bonds for cash.

“If interest rates suddenly rise due to an unexpected event [like last month’s UK mini budget] and bond markets crash, it’s not certain whether the repo market is large and stable enough to function. After all, you remain dependent on banks to accept bonds as collateral,” said Jan Mark van Mill, head of treasury and trading at APG.

jan mark van mill

Jan Mark van Mill, APG

Van Mill would like the ECB to follow the example of the Federal Reserve and the Bank of Canada to act as a lender of last resort, he said. So far, the ECB has refused to do so.

“The ECB believes they should only step in if the core of the financial system is under pressure. According to their definition, end users of the repo market are outside this scope,” said Van Mill, who disagreed with this view. “Financial stability is not just about banks.”


Van Mill’s proposal chimes with a position paper from European pension umbrella association Pensions Europe that was published in March. In its input to the European Commission consultation on the review of the central clearing framework in the EU, PensionsEurope calls for “the European central clearing houses to provide central bank liquidity to pension funds in times of stress to convert high quality government bonds into cash.”

Van Mill, however, does not expect the ECB to give in to the pressure emanating from the pension sector.

“We have been holding up to them a scenario such as the one that happened in the UK recently for 10 years already. The ECB’s answer has always been that the repo market functions fine. But at least we have a reason for a good talk now, and I expect this to happen too,” he said.

APG is a member of the ECB’s Financial Stability Contact Group, a forum of policy makers, investors and other market participants that meets twice a year under the leadership of the ECB’s vice president.

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