LEARNING TO NAVIGATE BUMPS IN THE ROAD
The Bank of England today published an update on the Sterling Monetary Framework Facilities and the recalibration of the Operational Standing Facility in an article called “Learning to Navigate Bumps in the Road”.
“The Bank of England’s balance sheet continues to evolve, with our new operating framework supporting our objectives of monetary and financial stability by anchoring key short-term market interest rates close to Bank Rate. Usage of our market-wide facilities – the Indexed Long-Term Repo (ILTR) and Short-Term Repo (STR) – has grown as intended, with a wide variety of counterparties borrowing from us each week. As a further stage in our ongoing balance sheet transition, we have recalibrated the price of the on-demand, bilateral Operational Standing Facility (OSF) to Bank Rate +/- 15 basis points (from +/- 25 basis points previously). This will allow firms to respond better to liquidity management needs that arise between our regular market-wide operations, ensuring short-term market interest rates remain anchored to Bank Rate while limiting the risk of private market disintermediation.
Repricing of the OSFs is an important step in strengthening the provision of reserves through our on-demand facilities. Sterling Monetary Framework (SMF) participants should ensure arrangements to access the Bank’s facilities are in place well in advance. This includes addressing internal governance and ensuring their teams – front office, risk, and settlements – understand how and when to use Bank facilities. As always, the Bank of England’s facilities are very much open for business.
This article sets out progress with our balance sheet transition, and the changes we are making to our bilateral facilities”.