The total of settlement-fail fines issued since they came into play a year ago, under the CSDR discipline regime, have been “bigger than expected” and “are not washing through the system as easily as anticipated”. This was concluded by the Bank of England’s Securities Lending Committee in its November meeting, according to minutes picked up by news site Securities Finance Times.

The Securities Finance Times summary, built on the BoE Securities Lending Committee notes, relays that the penalties have not resulted in significant improvements to the settlement rates, and that there is a “high” level of settlement fails in the securities lending industry. The UK’s debacle around the September “mini budget” – with the price crash and sudden rush for scarce margin-coverage assets (such as cash) in the market for so-called gilts – further contributed.

The gilts market crisis raised a challenge to many pension schemes whose portfolios rely on them (particularly those based on defined benefits as opposed to defined contributions), and so-called liability-driven investment (LDI) funds. Reuters published a good explainer here.