The move by the multi-billion Strathclyde and BBC pension funds follows the decision of the £37bn BT pension scheme last week to stop lending the stock of 20 UK and global financial institutions to third parties to help bolster market confidence.
In addition, the £11.7bn BAE pension scheme has scaled back lending activities out of concern for “systemic risk, rather than trying to stop short-sellers”.
The BT pension scheme’s move doubled the list of stocks it will not lend to third parties.
It follows a week of unprecedented turmoil in world financial markets, which put stock lending under the spotlight after concern about its use in short-selling – the process of betting a share price will fall.
Critics have argued that short-sellers helped drive down HBOS’ share price last week, prompting its merger with Lloyds TSB.
Paul Lee, director at Hermes Equity Ownership Services, which manages stock lending on behalf of the BT scheme, said: “We have long-standing processes to ensure we are not lending in situations that might be contrary to the long-term interests of the scheme.
“But last week we took the view that what is happening in the market had switched from a healthy clear-out of excesses to an unhealthy hunting-down of the weakest members of the pack.
“So we decided to add a slate of around 20 financial institutions across the world to our list before the Financial Services Authority decided to act on short-selling.”
The scheme stopped lending HBOS and Bradford & Bingley stock to third parties before their rights issues earlier this year.
Tom Willetts
