Making funds hold larger liquidity buffers and changing the terms of fund redemptions are among the policies being studied by the Bank of England to reduce the risk of a market crunch, an official said on Friday.

Andrew Bailey, chief executive of the UK Prudential Regulation Authority, the Bank's unit overseeing UK banks and insurers, said the options available included requiring funds to draw on large liquid buffers to ensure sales were processed smoothly. Alternatively, terms on fund redemptions could be altered to take account of liquidity conditions, known as 'gating'.