Bank of England Market Operations Guide: Our tools

Further detail on the market-wide operations and facilities we use to achieve our monetary policy and financial stability objectives

In this section

Our objectives

Our objectives

Our tools – How we use our balance sheet to achieve them

Our tools How we use our balance sheet to achieve them

Overview

This section of the Guide provides more detail on the market-wide operations and facilities we use to achieve our monetary policy and financial stability objectives. It also covers how firms can apply for access to our facilities. Our ‘open for business’ approach means that if eligible firms meet our supervisory threshold conditions and have appropriate collateral they can sign up to use our facilities.

Our sterling lending facilities at a glance

Market-wide

Short-Term Repo

A source of reserves for payments and precautionary reasons
  • Weekly operation
  • One-week term
  • Reserves lent
  • Priced at Bank Rate
  • Against Level A collateral

Indexed Long-Term Repo

A source of reserves for payments and precautionary reasons
  • Weekly operation
  • Six-month term
  • Reserves lent
  • Auction prices
  • Against Level A, B, or C collateral

Contingent Term Repo Facility

Actual or prospective market-wide stress meaning firms need cheap, plentiful cash at term
  • Triggered by the Bank
  • Flexible term
  • Reserves lent
  • Flexible pricing set at activation
  • Against Level A, B or C collateral

Bilateral

Operational Standing Facility

A tool to manage any very short-term unexpected or frictional payment shocks
  • On demand
  • Reserves lent (or deposited)
  • Overnight transaction
  • Against Level A collateral

Discount Window Facility

Firm-specific liquidity need requiring liquidity in bespoke size
  • On demand
  • Rollable 30-day term (five days for CCPs)
  • Gilts or in some circumstances reserves lent
  • Against Level A, B, or C collateral

Operational readiness

Operational readiness and resilience is important to us, and the PRA issues guidance and rules about this for the firms it regulates. As part of our role in markets, we do our own work to make sure we are operationally ready and resilient. We conduct regular testing on a range of market activities.

Managing risk

When we lend to firms, we naturally incur risk. To protect public money, we manage that risk in three ways:

  • First, by applying appropriate eligibility criteria. To be eligible to participate in the Bank’s operations, firms must be subject to robust supervisory oversight by the Prudential Regulation Authority (PRA) or a comparable prudential regulator. This oversight provides important assurance that we are lending only to firms that meet minimum prudential standards.
  • Second, by applying collateral requirements. When we lend through our facilities, whether in the form of cash (eg in the Indexed Long-Term Repo (ILTR)), or highly liquid securities (eg in the Discount Window Facility (DWF)), we manage our counterparty risk to the borrower by securing our lending against collateral posted by the borrowing firm. That collateral is subject to prudent reductions in value, known as haircuts.
  • Third, by pricing our facilities appropriately. Pricing is carefully set to make sure that, while our facilities are not a ‘last resort’, they are also not likely to be cheaper than private markets in normal times. This helps make sure that firms adopt a prudent approach and avoid undue concentration, balancing use of our liquidity insurance facilities with their use of other funding sources in the wider market.

Discussion paper: Transitioning to a repo-led framework

The Bank published a discussion paper, that seeks feedback on the Bank’s transition to a repo-led, demand-driven operating framework, including proposals to recalibrate the ILTR in line with its expanded role. The Bank welcomes views from current and prospective SMF participants, the wider market and the public with the deadline for providing feedback 31 January 2025. Comments should be provided to RepoLedFrameworkDP@bankofengland.co.uk

Who can apply

Eligible participants

Compared with many central banks, access to our operations is open to a relatively wide set of eligible financial firms. Our eligibility criteria apply by type of firm.

We assess whether a particular group of firms should be eligible to participate based on key considerations that include:

  • their critical importance to the financial system
  • the extent of overnight liquidity risk they run in their business
  • whether they are subject to appropriate regulatory scrutiny

If we judge a category of firm to be eligible for access to the Bank’s facilities, then all firms within it are eligible to apply – but only if they individually meet the Prudential Regulation Authority’s (PRA) threshold conditions for authorisation (or a comparable test if not PRA-regulated), and the operational and other requirement in our Terms and Conditions and Operating Procedures.

Participating in our operations is generally voluntary, and eligible firms can choose which operations they sign up to. The only exception is if a firm is a direct settling participant of the sterling high-value payment and securities settlement systems ‘CHAPS’ or ‘CREST’. Eligible firms that meet this criterion must hold a reserves account. These are normally coupled with access to our Operational Standing Facility (OSF), which is a key tool for managing reserves balances on an intra-day basis. This is necessary to make sure that participation in CHAPS and CREST can occur safely.

Which types of firms can participate in our operations

 

Bank APF asset purchases and sales Reserves accounts Operational Standing Facilities Discount Window Facility Indexed Long-Term Repo Short-Term Repo Contingent Term Repo (if activated) Non-sterling facilities Alternative Liquidity Facility

Banks/building societies

 yes yes yes yes yes yes yes yes yes (non-interest bearing banks only)
Broker-dealers yes yes yes yes yes yes yes yes no
Central counterparties no  yes yes yes no no no no no
International Central Securities Depositories no yes yes no no no no no no

Participation is also subject to a range of legal and operational requirements. For instance, if a firm is part of a wider legal group structure, we may ask for a guarantee from another firm in that group.

We also expect participants to give us enough information to manage risks effectively. And we require all participants to act in a way that is consistent with our objective of achieving competitive and fair sterling markets. Among other things, this can involve contributing to our market intelligence work.

Collateral requirements

When we lend through our facilities, we require collateral in return. The collateral must be of sufficient quality and quantity to protect our balance sheet from any risk of a counterparty failing to repay what it owes. If this does happen, we can sell or retain the collateral to cover our loss.

The collateral we ask for varies in quality, and not all collateral is eligible for all the facilities we offer.

Eligible collateral for lending summary

We accept a broad range of collateral, split into three liquidity buckets:

  • Level A collateral consists of assets expected to remain liquid in almost all market conditions, such as high-quality sovereign debt trading in very deep markets.
  • Level B collateral consists of assets that will normally be liquid, such as sovereign debt, supranational and private sector debt and the highest-quality asset-backed securities.
  • Level C collateral comprises typically less liquid assets, such as securitisations, securities delivered by the same entity that originated the underlying assets (‘own name’ assets) and portfolios of loans, including mortgages.

We do not normally accept equities as collateral for our facilities, but we have put in place the technical measures to do so at our discretion, should the need arise in the future. Participants wanting more information on this should contact us on applications@bankofengland.co.uk.

Our Sterling Monetary Framework (SMF) lending facilities provide a ‘liquidity upgrade’. This means we allow firms to swap less liquid collateral for the most liquid asset in the economy, central bank reserves.

Which collateral can be used for our facilities

Collateral level

A only

Operational Standing Facilities

Short-Term Repo

A, B and C[1]

Indexed Long-Term Repo

Discount Window Facility

Contingent Term Repo Facility

Non-sterling Repo

Term Funding Scheme with additional incentives for SMEs

Collateral haircuts

Our collateral list is broad. It extends in principle to any asset we judge we can effectively and efficiently risk-manage, subject to an appropriate discount applied to the market value of the asset. This ‘haircut’ is designed to protect us against falls in the value of collateral, so if a counterparty defaults, our sale of that collateral raises at least the amount borrowed against it. Higher-quality assets offer us greater protection against asset value volatility, and so require lower haircuts.

We publish base haircuts for Level A, Level B, and Level C securities.

Haircuts for Level C loan collateral are calculated for each pool of loans individually. They depend on our qualitative and quantitative assessment of the risks inherent in each portfolio. Haircuts reflect different risk characteristics. We may choose to apply ‘add-ons’ to address other risks that are specific to a particular counterparty or piece of collateral. 

We strongly encourage firms to pre-position a broad range of collateral with us. This can include High Quality Liquid Assets (HQLA) where these are eligible for use as collateral, or come from their broader stock of eligible assets. Once we complete satisfactory due diligence, we regard delivered eligible assets as pre-positioned so they may be drawn against.

Pre-positioning allows us to risk-assess price, value collateral and set a suitable haircut in advance of drawdown, therefore allowing firms to use our liquidity facilities more quickly when needed.

We will discuss with a firm in what order they would prefer us to use their collateral. We may also require counterparties to give us collateral diversified across issuers (known as a collateral ‘concentration limit’). 

Sterling Monetary Framework (SMF) operations

Reserves accounts

Reserves accounts are sterling-denominated instant access accounts offered to eligible financial firms that are held in our Real-Time Gross Settlement (RTGS) system. There is currently no maximum or minimum balance for most types of participant.[2]

Reserves accounts are a vital tool for implementing monetary policy since we remunerate reserves balances at Bank Rate, which is set by our Monetary Policy Committee (MPC) eight times a year (roughly every six weeks).

Bank Rate has historically been positive but could also be zero or negative. Under a negative Bank Rate, the Bank could also choose to apply more than one rate to reserves balances, in a system called tiered remuneration. More information on the operational arrangements for negative rates can be found in our SMF Operating Procedures.

Setting Bank Rate helps us meet our inflation target. Additionally, firms that are subject to prudential liquidity requirements can count reserves balances as High Quality Liquid Assets (HQLA). Read more about regulatory requirements.

Reserves accounts can also be used for settlement of payment flows in certain payment systems that settle through the Bank’s RTGS system. Balances held in this account can be used as a source of intra-day liquidity by settlement banks.

For certain firms which are not eligible for reserves accounts, we can instead offer standalone settlement accounts, to enable direct participation in payments systems that use our settlement services. More information on settlement accounts is available in our Settlement Account Policy.

Operational Standing Facility (OSF)

Our Operational Standing Facility (OSF) allows participating firms to deposit reserves with us or borrow reserves directly from us, throughout each business day.

Firms can use this facility as a tool to manage any unexpected or frictional payment shocks that could arise due to technical problems in their own systems, or in the market-wide payments and settlements infrastructure.

The operational standing lending facility consists of an overnight lending transaction collateralised against high-quality, highly-liquid (Level A) assets. We apply a 25 basis point premium (0.25%) above Bank Rate for this facility.

The operational standing deposit facility consists of an overnight deposit transaction. This currently returns 25 basis points below Bank Rate. 

We automatically couple reserves accounts (but not settlement accounts) with the OSF for all but the smallest participants.[3] Usage of the OSF is published subject to a lag, on the third Wednesday following the end of the corresponding maintenance period.

Sterling Monetary Framework (SMF): Sterling Lending Facilities

We provide sterling lending facilities on a regular basis, on demand, and at our discretion.

Some of our facilities are bilateral (ie between us and one firm at a time) and others are market-wide (ie between us and a number of firms at a time). But all SMF facilities operate on published terms that do not vary across participants.

All of our lending facilities are intended to support our ‘open for business’ approach. This means there is no presumptive order of usage.

Short-Term Repo (STR)

The STR is our regular market-wide sterling operation aimed at maintaining control of short-term market interest rates. The STR allows participants to borrow central bank reserves for a one-week period in exchange for high quality, highly liquid (Level A) assets.

This facility is priced at Bank Rate. Combined with the one-week term, this helps keep short-term market interest rates in line with Bank Rate by ensuring banks have little need to pay above Bank Rate for reserves in money markets.

There is an unlimited supply of central bank reserves available in the operation to make sure that banks’ demand for reserves continues to be met as QE (quantitative easing) unwind progresses. More information on how the STR supports QT (quantitative tightening) is included on the Our objectives page.

Key information about the STR

  • Eligible collateral: Participants bid against the SMF Level A collateral set.
  • Drawing types: The Bank lends unlimited amounts of central bank reserves.
  • Frequency: STR auctions are held weekly, each Thursday.
  • Term: The STR offers central bank reserves for a one-week term to target short-term interest rates.
  • Pricing: The STR is priced at Bank Rate.

STR operations are market-wide operations conducted using our electronic auctioning system, Btender. We may at our discretion also accept bids from participants by telephone. If Btender is unavailable for any reason, we will make an announcement on our wire services pages.

Publication arrangements

We will publish the total aggregate use of the STR soon after the close of each auction. We do not publish data regarding specific transactions or counterparties.

Indexed Long-Term Repo (ILTR)

The ILTR is one of the Bank’s regular market-wide sterling operation. The ILTR allows market participants to borrow central bank reserves (cash) for a six-month period in exchange for other, less liquid assets (collateral). We will only accept collateral of sufficient quality and quantity to protect ourselves fully from counterparty credit risk.

We do not view the ILTR as a facility to be used solely for liquidity insurance purposes. As we transition to our repo-led, demand-driven framework, we expect firms to use the ILTR to source reserves for payments and precautionary reasons.

The ILTR uses a competitive auction to lend central bank reserves. Participants can bid for reserves against the full range of eligible collateral.

We have designed the auction to be flexible, to respond to evolving market conditions, by providing more reserves to the market as demand increases. The ILTR’s response to varying demand is determined before the start of any auction, and we periodically review the appropriateness of this calibration.

The signal of higher demand for cash is the price participants are willing to pay in our auction:

  • as bid spreads rise, suggesting more stressed market conditions, the total size of the auction will increase.
  • if bid spreads against less liquid collateral rise (eg Level C), the auction will increase the proportion of liquidity allocated to less liquid collateral.

The auction applies a single clearing spread to each collateral set, which means:

  • if the auction clears at a spread below a participants bid, the participant will pay that lower spread.
  • if the auction clears at a spread above a participant’s bid, it suggests that the participant was not willing to pay that higher spread for funds, so the participant will not be allocated.
  • for those bids that match the clearing spread, the participant will pay that spread, but may be subject to scaling if demand is strong and be partially allocated.

Participants should bid the maximum price they would be willing to pay for funds against each collateral set, to be more likely for the bid to be allocated in full.

How ILTR works

1. ILTR auction

ILTR Auction
On the day of auction, counterparty firms bid for reserves against a range of collateral, at the maximum spread to Bank Rate they are willing to pay. Not all bids will succeed (e.g. counterparty B).

2. Settlement at T+2

Settlement at T2
Firms will receive cash in return for collateral.

3. Maturity T+6m

Maturity T6m

Six months from the auction date, firms will repay the cash plus fees, and will receive the collateral back. If the fee rate is negative (for instance if Bank Rate is negative), we pay a fee to the counterparty.

 

Key information about the ILTR

  • Eligible collateral: Participants can bid against all SMF level A, B and C collateral sets (including loan pools). Participants are strongly encouraged to deliver any Levels A and B collateral to us that they intend to use in in advance of an ILTR operation. Level C securities must be delivered to us in advance of the operation, and all loan collateral must be pre-positioned.
  • Drawing types: The Bank lends central bank reserves.
  • Frequency: Weekly auctions, typically held on a Tuesday.
  • Term: The ILTR offers central bank reserves for a six-month term.

Pricing and participation:

  • The rate is indexed to Bank Rate. This enables participants to take part without having to take a view on the future path of Bank Rate, and it allows us to reduce our exposure to market risk.
  • Participants bid by submitting a nominal amount and a spread to Bank Rate, expressed in basis points (e.g. 15bps), against a specific collateral set. The minimum spread against each collateral set is predetermined; Level A collateral is +0bps, Level B collateral is +5bps and Level C collateral is +15bps.
  • The auction’s pricing mechanism uses a ‘uniform price’ format. This means every successful bidder pays the ‘clearing spread’ for borrowing against a specific collateral set.
  • Participants should bid the maximum price they would be willing to pay for funds, against each collateral set, as this gives the greatest probability that their bid will be fully allocated.

ILTR operations are market-wide operations conducted using our electronic auctioning system, Btender. We may at our discretion also accept bids from participants by telephone; participants without access to Btender should submit their bids by telephone to the Sterling Desk. If Btender is unavailable for any reason, we will make an announcement on our wire services pages.

Publication arrangements

We publish the total aggregate use of the ILTR soon after each auction closes. We do not publish data regarding specific transactions or counterparties.

The Discount Window Facility (DWF)

The Discount Window Facility (DWF) is a bilateral facility, where firms can borrow highly liquid assets (gilts or, in certain circumstances, cash) in return for other assets (collateral).

Participating firms need to meet PRA Threshold Conditions and have sufficient eligible collateral. If they meet these requirements, there is a presumption that we will lend via the DWF.

This facility is available on demand. It is intended for firms that anticipate or experience a previously unexpected liquidity need. The DWF may be drawn on to meet such a need when required.

Firms should exercise their own judgement in applying for and using the DWF as part of effective liquidity management. Use of the DWF – and other sources of liquidity – should be considered alongside a firm’s own liquidity buffers, but we do not assume a particular order of usage in terms of drawing down on liquidity buffers before the use of the DWF (or vice versa).

1. Drawing

Drawing

2. Termination

Termination

Key information about the DWF

  • Eligible collateral: consists of all SMF level A, B and C collateral sets (including loan pools). Participants are encouraged to maintain sufficient eligible collateral to enable quick and smooth drawing in the DWF as the need arises. It may take some time to pre-position some assets, for example loan collateral, own name securities and complex assets. They should be positioned well in advance of any drawing.
  • Drawing types: We will lend gilts, or in some circumstances cash (for example, where a firm’s access to repo market is limited). If participants receive gilts, they may choose to lend them in the market to raise cash, or use them as collateral in the ILTR.
  • Term: Initial drawings are for an up to 30-day term. But for longer temporary liquidity needs, participants can apply to roll DWF drawings. Drawings may also be repaid at any point. CCPs have access to use the DWF for cash drawings for up to a five-day term.
  • Pricing: DWF fees vary from market rates in routine circumstances, but are designed to offer SMF participants more affordable liquidity during less normal conditions. They are designed to:
    • reflect the type of collateral used
    • avoid providing a subsidy for illiquid collateral relative to the market and the size of the drawing
    • incentivise repayment when borrowings are no longer needed.

Chart: Pricing of eligible collateral as a proportion of eligible liabilities

Chart Pricing of eligible collateral as a proportion of eligible liabilities

Publication arrangements

Our publication approach seeks to balance transparency with discretion about individual counterparty relationships, and to minimise any potential risks to financial stability through premature publication.

We publish (with a time lag) the average daily value of lending over a calendar quarter, totalled across counterparties. This is published on the first Tuesday after the final working day of the calendar quarter, five quarters ahead. We do not publish data on specific transactions or counterparties.

Contingent Term Repo Facility (CTRF)

The Contingent Term Repo Facility (CTRF) allows us to provide liquidity against the full range of eligible collateral at any time, term, and price we choose. We can activate it in response to any actual or prospective market-wide event. This enables us to respond to a market stress in a flexible way. We take prevailing market conditions into account when we set the terms. We do not use CTRF routinely, but it is available when market conditions or other factors mean we need a tool in addition to our other facilities. The CTRF is designed to be flexible, so when we judge that a CTRF is needed, we calibrate its pricing and terms to suit the market at that time.

We last announced a CTRF in March 2020 to help manage market disruption caused by the outbreak of the Covid-19 pandemic. It stayed in place until June 2020. Further information can be found in this Market Notice.

Publication arrangements

We decide what information to publish about the facility’s usage when we activate it. This is normally in line with other facilities, e.g. we include total aggregate use of the facility after the operation closes.

Term funding

The Term Funding Scheme with additional incentives for SMEs (TFSME) (closed to new drawings)

In March 2020, during market uncertainty caused by the Covid-19 virus, our MPC introduced the Term Funding Scheme with additional incentives for SMEs (TFSME). The TFSME was designed to:

  • help reinforce the transmission of the Bank Rate reduction to the real economy to make sure that businesses and households could benefit from the MPC’s actions
  • give participants a cost-effective source of funding to support additional lending to the real economy, providing insurance against adverse conditions in bank funding markets
  • incentivise banks to provide credit to businesses and households to bridge through a period of economic disruption, and
  • give banks additional incentives to support lending to small and medium-sized enterprises (SMEs) that typically bear the brunt of contractions in the supply of credit during periods of heightened risk aversion and economic downturns.

We published a TFSME Market Notice, TFSME operating procedures and TFSME terms and conditions providing more details on the operation of the TFSME.

Drawdowns, terms and fees

The TFSME is now closed to new drawings. Loans were offered from April 2020 to October 2021.

Participants may terminate any transaction, in part or in full, before its maturity date. The interest rate on TFSME transactions is equal to Bank Rate plus a Scheme fee (TFSME Fee).

Borrowing allowance

Participants (within a given TFSME group of related firms) were permitted to draw down an amount up to their “Borrowing Allowance”. This was calculated from an “Initial Allowance” based on the amount of lending they had done, plus an “Additional Allowance”. The Additional Allowance comprised two parts:

  • One times Non-SME Net Lending over the Reference Period to UK resident: households (excluding UBs), Large Corporates, and non-bank credit providers (NBCPs) that are not part of the TFSME Group.
  • Five times Net Lending to SMEs over the Reference Period.

Participants in the Term Funding Scheme (TFS) we launched in 2016 could repay TFS drawings and redraw in the TFSME, subject to having sufficient Borrowing Allowance in the TFSME.

Published information

We publish the size of each Participants’ outstanding drawings, and each TFSME Group’s Base Stock and Net Lending data, quarterly with a lag. Details of aggregate TFSME drawings are also published weekly on our website.

Asset purchases and sales

We hold a stock of purchased assets through the Asset Purchase Facility (APF) as part of QE, which is being reduced as QE is unwound. Our stock of purchases includes assets in the form of government and corporate bonds with the aim of lowering the ‘yield’ or ‘interest rate’ on those assets. This incentivises investors to move funds into other types of assets. In turn that feeds through to lower interest rates offered on loans for households and businesses, since rates on government bonds tend to affect other interest rates in the economy.

In February 2022, the MPC decided to begin to reduce its stock of asset purchases by no longer reinvesting maturing government and corporate bonds, and by a programme of corporate bond sales. In August 2022, the MPC announced its intention to start a UK government bond sales programme, subject to economic and market conditions being judged appropriate at the time of a confirmatory vote. In September 2022, the MPC agreed to reduce the stock of UK government bond purchases by £80 billion over the next twelve months, comprising both maturing gilts and gilt sales, to a total of £758 billion.

The ultimate private sector owners of these types of asset are primarily non-banks, so the majority of our purchased assets were previously held by these investors and they are likely to play an important role in absorbing any assets sold. Banks and broker-dealers act as intermediaries in the process.

We carry out any asset purchase or sale operations for monetary policy purchases in a transparent and non-discretionary manner. The competitive auction element of the operations uses our Btender system.

Gilts

At present we are not making new purchases of gilts, following the MPC’s decision to reduce the stock of UK government bond purchases by no longer reinvesting maturing assets.

In September 2022, the MPC voted to begin the sale of UK government bonds held in the Asset Purchase Facility. It agreed to reduce the stock of UK government bond purchases by £80 billion over the next twelve months, comprising both maturing gilts and gilt sales, to a total of £758 billion.

In September 2023, the MPC voted to reduce the stock of UK government bonds held in the Asset Purchase Facility for monetary policy purposes by £100 billion over the next twelve months, comprising both maturing gilts and gilt sales, to a total of £658 billion. Details of the auction approach have been set out in a Market Notice, and the operational schedule has been made available.

When in operation, gilt purchases and sales are done via auctions that work in the following way:

  • Direct participation in our auctions is open to firms that are Gilt-Edged Market Makers (GEMMs), who may act on their own behalf or for their clients.
  • We use a discriminatory price format for our auctions, where every successful participant receives the price they offered to sell or buy at.
  • We rank the offers according to the attractiveness of the yield for us relative to the market yield of each gilt at the end of the auction. We keep doing this until we have reached the amount we wish or sell.
  • We place no restriction on the number of offers or bids submitted, and no restriction on what proportion in each auction can be allocated to specific counterparties or gilts.
  • We determine the eligibility of each individual gilt for each operation by its maturity.

Short-term non-sterling liquidity facilities

The Bank of England, the Bank of Canada, the European Central Bank, the Federal Reserve, the Bank of Japan and the Swiss National Bank have an established network of standing bilateral swap lines. These allow liquidity to be provided in each jurisdiction in any of the five currencies foreign to that jurisdiction, if the two central banks in a particular bilateral swap arrangement judge that market conditions warrant such action in one of their currencies.

To support our financial stability objective, we use these swap lines, supplemented with other arrangements if required, to offer short-term repo transactions with participating firms in selected other currencies, against the full range of collateral. The frequency of these operations is at our discretion, in agreement with the relevant central bank; they currently take place weekly for US dollars.

Key information about short-term non-sterling liquidity facilities

  • Eligible collateral: Participants can bid against all SMF level A, B and C collateral sets (including loan pools). Participants are strongly encouraged to deliver any Levels A and B collateral to us that they intend to use in in advance of an operation. Level C securities must be delivered to us in advance of the operation, and all loan collateral must be pre-positioned.
  • Drawing types: Non-sterling currencies - US dollars currently and previously euros.
  • Frequency: Operations take place on a weekly basis (Wednesday).
  • Term: The US dollar repo offers non-sterling liquidity for a one-week term. The LiFE operations previously offered non-sterling liquidity for a one-week term.
  • Pricing: The US dollar repo is priced at the matched maturity U.S. dollar overnight index swap (OIS) rate plus 25 basis points.

Participation:

Non-sterling currency operations are market-wide operations conducted using our electronic auctioning system, Btender. At our discretion we may also accept bids from participants by telephone to our sterling money market desk. Participants without access to Btender should submit their bids by telephone to the Sterling Desk. If Btender were to be unavailable for any reason, we would make an announcement on our wire services pages.

Publication arrangements

We publish the total aggregate use of our non-sterling currency operations on our website soon after the close of each auction. We do this for each currency, currently US dollar and previously also for euro. We do not publish data regarding specific transactions or counterparties.

Alternative Liquidity Facility (ALF)

The Alternative Liquidity Facility (ALF) is a fund-based deposit facility available to UK banks which face formal restrictions on engaging in interest-bearing activity. These firms are unable to participate in the Bank’s other facilities under the Sterling Monetary Framework (SMF).

Operation of the ALF

Deposits in the ALF are backed by a portfolio of high-quality eligible assets, which could include eligible fixed-income bonds or sterling cash held on a non-interest bearing account. These deposits and backing assets are held on a segregated basis by a separate entity – the Bank of England Alternative Liquidity Facility Limited (BEALF), which is a wholly owned subsidiary of the Bank.

Returns generated from the backing fund may be passed back to depositors in lieu of interest, net of hedging and operational costs. Relatedly, the deposit capacity of the ALF is limited to the size of the backing fund, which is currently £200 million and may be reviewed from time to time.

Deposits in the ALF are treated as ‘Level 1’ HQLA for the Liquidity Coverage Ratio (LCR) under the Capital Requirements Directive and Capital Requirements Regulation. For the ALF’s participants, this enables greater flexibility in meeting regulatory requirements under Basel III prudential rules.

Operation of the Alternative Liquidity Facility (ALF)

Operation of the ALF

Key information about the ALF

  • Allocation: Participants will have a base deposit amount, calculated using factors including liquidity data from submitted regulatory returns. The deposit amount for each participant will be kept under review and may change over time. Bids over and above this amount can be submitted, and will be allocated from any available spare capacity in the facility using a weighting mechanism. Participants need not use all their base deposit amount.
  • Size: Up to £200 million of aggregate deposits will be accepted in aggregate across all participants.
  • Frequency: Operations take place on a weekly basis.
  • Term: ALF deposits are placed for seven calendar days.

Participation:

  • ALF operations are open to UK regulated banks that face formal restrictions on engaging in interest-bearing activity and can submit the necessary liquidity data to allow the accurate and timely calculation of their deposit amount
  • ALF operations are subject to the ALF documentation

Publication arrangements

We publish the aggregate use of our ALF operations on our website, averaged over a monthly reporting period and with a one-quarter lag. We do not publish data regarding specific transactions.

We publish a list of the assets that form the composition of the ALF backing fund. This information is updated when there are changes to asset composition.

Are you an eligible financial firm? Find out more about applying to the ALF.

Publishing usage of our lending operations

We publish usage of our lending facilities in a way which complements the objectives of our facilities. Usage of our lending facilities can be found in the results and data section.

Our approach seeks to balance transparency with discretion about individual counterparty relationships. That is why usage data is typically only published in aggregate or averaged across counterparties.

The SMF terms and conditions set out the obligations relating to confidentiality in connection with SMF facilities.

Firms are of course responsible for their own transparency and disclosure obligations, including compliance with any legal or regulatory requirements.

Historic facilities and schemes

We have previously launched temporary facilities and schemes to help us achieve our objectives of monetary and financial stability. This section gives details of those that were launched after 2012 but are now closed to new drawings. Any remaining stock or transactions have matured.

Funding for Lending Scheme (FLS)

Operation of the FLS

Along with HM Treasury, we launched the FLS in July 2012, during the euro area debt crisis. The crisis had caused a sharp increase in bank funding costs, impairing the flow of credit around the UK banking system.

Our objective with the FLS was to encourage lending to households and companies, The scheme did this by providing funding to banks and building societies for an extended period, at below market rates, with both the price and quantity of funding provided linked to their performance in lending to the UK real economy.

We subsequently revised the design and extended the availability of the FLS in April 2013. We did this to increase the incentives for banks to lend to small and medium-sized enterprises. We announced further extensions in December 2014 and November 2015.

The FLS is closed to new borrowers. Loans were offered from August 2012 to January 2018. The final FLS loans were repaid in September 2021.

Further information on how the FLS was operated.

Key statistics

Total outstanding FLS drawings reached a peak of nearly £39 billion in September 2016.

Just under 50 banks and building societies signed up to the facility and had a combined borrowing allowance of over £70 billion. Of those who signed up, around 40 drew from the scheme.

Data publications

A full time series of aggregate net drawings from the FLS is available in our database. Counterparty-specific data on drawings, borrowing allowances and lending is linked in the explanatory notes.

Term Funding Scheme (TFS)

Operation of the TFS

In August 2016, the MPC introduced a Term Funding Scheme (TFS). Its primary objective was to reinforce the pass through of the cut in Bank Rate at that time to the interest rates faced by households and companies in the wider market. This allowed the reduction from 0.5% to 0.25% to have broadly the same impact as cuts made when rates were further from zero.

The scheme’s design reflected this primary objective. It was calibrated so that the reduction in Bank Rate could have a broadly neutral impact on lenders’ margins in aggregate.

The TFS provided four-year funding to eligible firms, in the form of central bank reserves, at rates close to Bank Rate, and against the full range of eligible collateral. This helped it meet its objectives in broadly two ways. First, by giving access to a significant amount of funding at rates at or close to Bank Rate, the TFS directly lowered average funding costs, allowing that reduction to be passed on to borrowers. Second, indirect funding costs were reduced, as the TFS reduced the amount of debt that lenders would need to issue in the market.

The price and amount of funding available was linked to the quantity of participants’ net real economy lending over a reference period. The TFS was originally launched with a government indemnity. But in January 2019, after we received a capital injection from the Government, all loans and the collateral backing them were transferred from the Asset Purchase Facility (APF) to our own balance sheet.

The TFS is closed to new drawings. Loans were offered from September 2016 to February 2018. The final TFS drawings were repaid in February 2022.

Further information on how the TFS was operated.

Key statistics

The scheme offered £127 billion of loans across the drawings period.

A total of 62 banks and building societies drew from the TFS. Of these, 54 participants delivered positive net lending between July 2016 and December 2017, thus qualifying for a lower interest rate on their borrowings.

Data publications:

A full time series of aggregate drawings, repayments and maturities for the TFS is available in our database. Counterparty-specific data on drawings and lending is linked in the explanatory notes.

Covid Corporate Financing Facility (CCFF)

Operation of the CCFF

Along with HM Treasury, we launched the CCFF in March 2020, during the Covid-19 crisis. The CCFF offered funding to large employers who would normally raise funds through the financial markets.

The CCFF aimed to help keep companies in business and able to pay employee wages and suppliers, helping them to bridge disruption to their cashflows because of the Covid-19 economic shock. By lending to large companies directly, the CCFF protected the space for banks to lend to the wider population of companies, complementing other Bank of England and Government schemes at the time.

Funding was made available by buying short-term debt in the form of commercial paper. Participating companies could offer commercial paper to the CCFF with a maturity of one week to twelve months in daily operational windows. The CCFF offered funding at prices comparable to those prevailing in markets in the period before the Covid-19 economic shock. Commercial paper was bought at a spread above a reference rate, based on the current sterling overnight index swap (OIS) rate. The spread offered depended on the company’s credit rating.

To be eligible, companies had to be large employers in the UK or play an important role in our economy. They also needed to have been in sound financial health before the Covid shock. Financial companies and public authorities could not apply. From May 2020, for purchases of any commercial paper maturing after May 2021, companies had to commit to restraints on their capital distributions and senior pay.

The CCFF closed to new purchases in March 2021 and all commercial paper matured or was sold back to the issuer by March 2022.

Key statistics

The CCFF lent more than £37 billion to 107 companies. In May 2020, CCFF held over £20 billion worth of commercial paper.

The combined borrowing capacity of the more than 230 companies that signed up to the facility reached a peak of over £85 billion. These companies were responsible for almost 2.5 million jobs in the UK at the time.

Data publications

A full time series of commercial paper purchases, and net amounts outstanding in the CCFF is available in our database. Counterparty-specific data on net amounts outstanding in the CCFF is linked in the explanatory notes.

Asset purchase facility – financial stability gilt portfolio

Purchases

Between 28 September and 14 October 2022, the Bank of England, in line with its financial stability objective, conducted temporary and targeted purchases of index-linked and long-dated conventional UK government bonds (gilts). These purchases sought to act as a temporary backstop to restore orderly conditions in the market for index-linked and long-dated UK government bonds (gilts), and in doing so reduce risks from contagion to credit conditions for UK households and businesses.

The gilts bought in these operations were held in a segregated portfolio of the Asset Purchase Facility. In total, the Bank bought £19.3 billion of gilts, of which £12.1 billion were long-dated conventional gilts and £7.2 billion were index-linked gilts.

Further details of the Bank’s financial stability gilt purchases can be found in the 28 September 2022 news release and Market Notice as well as the 11 October 2022 news release and Market Notice. The APF Quarterly report for Q4 2022 also includes further information regarding the Bank’s financial stability intervention.

Sales

The Bank began unwinding these gilt purchases on 29 November 2022, consistent with our commitment to temporary intervention. The portfolio was unwound in a way that was timely but orderly. The Bank ran a series of reverse enquiry windows during which eligible counterparties could bid for the gilts held in this portfolio. This approach allowed the Bank to meet demand for gilts where it existed, while limiting the impact of such sales on wider market conditions. Further details of the demand-led sales approach can be found in the 10 November news release.

As confirmed in the 12 January 2023 news release, the Bank announced we had completed sales of the £19.3 billion portfolio of temporary holdings of UK government bonds.

Key statistics

In total, between 28 September and 14 October, the Bank purchased £19.3 billion of gilts, of which £12.1 billion were long-dated conventional gilts and £7.2 billion were index-linked gilts. Sales of assets in the financial stability portfolio began on 29 November and were fully completed by 12 January 2023.

Data publications

Data on the value of each of the bonds bought under the Bank's temporary financial stability gilt purchases is published here.

A detailed breakdown of the results of these gilt sales, including in nominal and sales proceeds terms, is provided in the spreadsheet below. This data is reported on a trade date basis.

Temporary Expanded Collateral Repo Facility

On 10 October 2022 and in line with our financial stability objective to avoid dysfunction in core funding markets, the Bank launched the Temporary Expanded Collateral Repo Facility (TECRF). The facility enabled banks to help ease liquidity pressures facing their client LDI funds through liquidity insurance operations. The facility closed on 10 November 2022. See the full news release: Bank of England announces additional measures to support market functioning.

Data publications

The Bank does not publish data on individual transactions in the Temporary Expanded Collateral Repo Facility. Following the facility’s closure, the Bank published aggregate usage of the scheme on 17 November 2022.

Corporate bonds

Purchases

The Corporate Bond Purchase Scheme (CBPS) was introduced in 2016, as a monetary policy tool. It aimed to impart monetary stimulus by lowering the yields on corporate bonds, thereby reducing the cost of borrowing for companies. A £10bn portfolio of non-financial investment grade corporate bonds was bought via the Asset Purchase Facility (APF), with purchases starting in September 2016. In March 2020, the MPC decided to expand the portfolio to £20bn as part of a package of measures announced in response to the Covid crisis.

The scheme aimed to buy a balanced portfolio of corporate bonds across eligible issuers and sectors, ensuring a representative portion of the market, so as not to influence the allocation of credit to particular companies or sectors of the economy.

To maximise the effectiveness and efficiency of the economic stimulus, purchases were limited to investment-grade bonds issued by companies that made a material contribution to economic activity in the UK.

In November 2021, the Bank announced it would adjust the portfolio to support the transition to net zero, while maintaining our monetary policy purpose. The Bank set out a high-level principles we would use to guide the transition. These would be achieved and put into action through four tools: targets, eligibility, tilting and escalation. Further information was set out in the November 2021 news release.

Sales

At its February 2022 meeting, the MPC asked the Bank to design a programme for selling corporate bonds held in the APF, with the stock of holdings to be fully unwound no earlier than towards the end of 2023. Sales began in September 2022 and were concluded in June 2023. A small portfolio of very short maturity bonds was held after sales concluded. It fully matured by early April 2024.

Key statistics

£10 billion of corporate bonds were bought between October 2016 and April 2017. Work took place between September and October 2019 to reinvest the proceeds from maturing bonds. A further £10bn of corporate bonds were bought between April 2020 to October 2020 to bring the total stock to £20bn. Further work took place between November 2021 and January 2022 to reinvest proceeds from maturing bonds. Sales operations began in September 2022 and concluded in June 2023. The portfolio, ahead of sales starting in September 2022, comprised 342 bonds, across 115 issuers.

Data publications

A full time series of the weekly stock of holdings of corporate bonds from the corporate bond purchase scheme is available in our database.

  1. Except for central counterparties (CCPs), which are not permitted to use Level C assets as collateral

  2. Except for central counterparties (CCPs) and International Central Securities Depositories (ICSDs), which are required to maintain a pre-agreed average target balance for each maintenance period.

  3. Further information is available upon request on eligibility criteria for reserves account only access to the SMF.

    1. Asset Purchase Facility (APF): Formally known as the Bank of England Asset Purchase Facility Fund Limited (BEAPFF). This is the subsidiary of the Bank used to undertake quantitative easing (QE). It is used to purchase financial assets such as gilts and corporate bonds, to boost economic activity and help meet the inflation target.  
    2. Bank Rate: The interest rate the Bank pays on reserves accounts, as determined by the Bank’s Monetary Policy Committee (MPC). It is the main mechanism for implementing monetary policy.
    3. Bank Recovery and Resolution Directive (BRRD): A set of rules, powers and arrangements for central banks to help firms to overcome financial distress, and to deal with failed banks in an orderly way.
    4. Bilateral facilities: Operations where the Bank transacts with a single eligible financial firm.
    5. Broker-dealer: A firm that enters into financial transactions for itself or on behalf of its clients. Broker-dealers are eligible financial firms if they are prudentially regulated as designated investment firms by the Prudential Regulation Authority (PRA) (or equivalent regulator) and are also large enough to be deemed critical to the stability of the financial system.  
    6. Btender: The Bank of England’s auction system, used in market-wide operations such as Indexed Long Term Repo (ILTR) and repo operations in non-sterling currencies.  
    7. Central bank money: Also known as ‘base money’, this is the combined total of deposits held in reserves accounts at the central bank and notes in circulation.  
    8. Central Counterparty (CCP): A type of financial market infrastructure (FMI) which provides clearing services, ie it stands as buyer to every seller and seller to every buyer, thereby mitigating counterparty risk within a given market. CCPs are regulated under Section 18 of the Financial Services and Markets Act.
    9. Contingent Term Repo Facility (CTRF): A market-wide liquidity facility activated at the Bank’s discretion, in response to a market stress or disruption. The CTRF provides liquidity in the form of reserves via an auction, for a term set by the Bank at the time of launch.
    10. Discount Window Facility (DWF): A bilateral liquidity facility, activated on demand by a participating firm. The DWF provides liquidity, usually in the form of gilts, for a rollable 30-day term.  
    11. Eligibility criteria: Conditions which firms must meet to obtain access to the Bank’s facilities, namely that they are: i) critically important to the financial system, and which in conducting liquidity, payment or lending services incur overnight liquidity risk; and, ii) are suitably regulated on this basis.
    12.  Eligible collateral: This is an asset that a borrower provides to their lender to secure a loan. If the borrower fails to repay the loan, the lender can keep or sell the collateral. The Bank reviews and approves collateral given to it in operations to ensure it is of sufficient quality
    13. Eligible financial firm: A firm which meets the Bank’s eligibility criteria, namely a bank, building society, broker-dealers, or central counterparties (CCPs).
    14. Facility: A standing arrangement to undertake a series of transactions or operations.  
    15. Financial Market Infrastructure (FMI): A firm which provides a critical service by connecting financial market participants with each other. They do this by, for example, transferring payments, recording and transferring ownership of securities, or, in the case of CCPs, clearing transactions between counterparties.  
    16. Financial Policy Committee (FPC): A committee of the Bank responsible for identifying, monitoring and taking action to remove or reduce systemic risks, to protect and enhance the resilience of the UK financial system. 
    17. Financial stability: The ability of a financial system to provide essential services to households and businesses, in both good times and bad.
    18. Floor system: The monetary policy approach of remunerating all reserves at Bank Rate, to ensure short term wholesale money market interest rates remain stable at close to this level.  
    19. Funding for Lending Scheme (FLS): A scheme launched in 2012 in conjunction with HM Treasury, to encourage banks and building societies to lend to households and businesses. The FLS closed to new drawings in January 2018.  
    20. Gilt-Edged Market Maker (GEMM): A firm approved by the Debt Management Office to take part in their auctions of UK government debt.
    21. High Quality Liquid Assets (HQLA): Assets which can be converted into cash easily and immediately in private markets, to meet a firm’s liquidity needs over a 30 calendar day stress scenario.  
    22. Indexed Long Term Repo (ILTR): The Bank’s routine market-wide liquidity facility. The ILTR uses a competitive auction to lend reserves against a range of collateral, for a six month term.
    23. Inflation target: The level of inflation that the UK Government sets the Bank of England (currently 2%), to ensure price or monetary stability.  Ensuring that the prices of goods and services remains stable allows households and businesses to better plan for the future.  
    24. Intraday liquidity: Funds which firms have available during the business day, to allow payments to settle promptly.  
    25. Liquidity Facility in Euros (LiFE): A non-sterling repo facility of the Bank, which participants can use to borrow euros against a range of collateral, for a seven day term.  
    26. Liquidity risk: The risk that a firm’s net outflows of cash become greater than their net inflows, and they are unable to meet their financial obligations as these fall due.  
    27. Maintenance period: The time between two consecutive MPC announcement dates. It begins on the day of the announcement, and finishes at the close of business on the day before the next announcement.
    28. Market-wide facilities: Operations where the Bank transacts with multiple eligible financial firms at the same time.
    29. Monetary Policy Committee (MPC): A committee of the Bank responsible for maintaining price stability within the UK, and, subject to that, supporting the economic policy of the Government, including its objectives for growth and employment.  
    30. Monetary stability: Ensuring that prices remain stable and inflation – the rate at which prices rise over time – is low and steady.  
    31. Operational Standing Facilities (OSFs): The Bank’s very short term deposit and lending facilities, designed to help participants manage temporary frictional problems in the payments systems and overnight money markets.  
    32. Operation: An individual transaction such as an asset purchase or sale, or lending arrangement.  
    33. Open Market Operations (OMOs): The group of auction facilities offered by the Bank to supply or drain the amount of reserves in the system.
    34. Primary market: The market for financial instruments between the issuer of those instruments, and the investor.
    35. Prudential regulation: The rules which require firms to hold a sufficient quantity and quality of assets, or capital, in a sufficiently liquid form, to meet their obligations as they fall due. These rules also include requirements to ensure adequate firms have adequate risk management and controls in place to manage their capital.  
    36. Prudential Regulation Authority (PRA): The part of the Bank responsible for prudentially regulating and supervising certain financial services firms, namely banks, building societies, credit unions, insurers, and broker-dealers.  
    37. Quantitative Easing (QE): A tool used by central banks to inject money directly into the economy, with the aim of boosting spending and investment.  
    38. Quantitative Tightening (QT): Reduction in the stock of assets purchased under QE by no longer reinvesting maturing government and corporate bonds and/or through a programme of sales.  
    39. Red Book: The name of the Bank’s former guide to its sterling operations.  
    40. Reserves account: An on demand deposit account provided by the Bank of England to eligible financial firms, paying interest at Bank Rate.  
    41. Reserves averaging: The monetary policy approach of influencing the supply of money, by requiring participants to set a target for their own usage of reserves over a maintenance period.  
    42. Secondary markets: The market for financial instruments between investors.
    43. Settlement account: An account used by settlement banks to make payments in the Bank’s Real-Time Gross Settlement (RTGS) system.
    44. Settlement bank: A bank which is connected directly to the Bank’s Real-Time Gross Settlement (RTGS) infrastructure, the Bank’s accounting and settlement system.  
    45. Special Liquidity Scheme (SLS): A temporary scheme of the Bank introduced in 2008 to improve the liquidity position of the banking system.  It did this by allowing participants to swap their high-quality assets for UK Treasury Bills for up to three years.  The last SLS transaction expired in 2012.  
    46. Sterling Desk contact: telephone: +44 (0) 20 3461 5000 or email Markets-SMDDealers@bankofengland.co.uk.
    47. Sterling Monetary Framework (SMF): The Bank’s framework for operating in sterling money markets - the unsecured deposits and funding market, the securities lending market, and the repo market, for maturities of one year or less.
    48. Term Funding Scheme (TFS): A scheme launched in 2016 as a monetary policy tool. It allowed participating banks to borrow funds in the form of reserves at close to Bank Rate, with the intention that this would be passed through to lending rates in the real economy. The TFS closed to new drawings in February 2018.  
    49. Threshold Conditions: the basic regulatory requirements firms must meet to be authorised and permitted to undertake regulated (financial) activity. This includes remaining solvent, and holding sufficient and suitable assets to use as collateral.  
    50.  UK Money Markets Code (UKMMC): A voluntary set of standards setting out best practice in UK financial markets.
    51. US Dollar Repo: A non-sterling repo facility of the Bank, which participants can use to borrow US dollars against a range of collateral, for a seven day term.  

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This page was last updated 21 January 2025