Bank of England opens New Contingent Non-Bank Lending Facility for applications

News release 

The Bank of England today opened the Contingent Non-Bank Financial Institution Repo Facility (CNRF) for applications.

The new facility, which will only be activated during episodes of severe gilt market dysfunction, will lend to participating insurance companies, pension schemes and liability driven investment funds to help maintain financial stability. This follows the Bank setting out the CNRF’s initial design in July 2024.^{footnote [1]}

Vicky Saporta, Bank of England, Executive Director for Markets said:

“Opening for CNRF applications marks a significant step forward in our efforts to deal with future episodes of gilt market dysfunction. Having the ability to lend to eligible non-bank financial institutions in times of severe market stress means we are better equipped to protect financial stability for the benefit of households and businesses throughout the UK.”

To ensure its effective design and implementation, the Bank had welcomed views from firms and industry bodies on the first-of-its-kind facility for the UK.

Zoe Alexander, Pensions Lifetime Savings Association, Director of Policy and Advocacy, said:

"The PLSA strongly welcomes this facility and has been consulted by the Bank during its development. It will provide greater reassurance to defined benefit pension schemes, and their members, that they will be able to obtain liquidity during periods of market dysfunction”

David Otudeko, Association of British Insurers, Interim Director of Regulation, said:

“The ABI welcomes the Bank of England’s new CNRF. It is a helpful emergency liquidity tool to be used during periods of severe market dysfunction only, that could temporarily increase demand for liquidity.”

As outlined in previous Bank publications and speeches,^{footnote [2]} non-bank financial institutions have continued to grow in significance and importance in terms of the impact on UK financial stability. This new tool will support financial stability in times of severe market stress, by providing backstop liquidity to participating insurance companies, pension funds and liability driven investment funds, reducing their need to sell assets.

Notes to editors

1. The CNRF is now open to applications but will only be activated at the Bank’s sole discretion during times of severe gilt market stress that threaten UK financial stability.
2. CNRF eligibility is targeted at insurance companies, defined benefit pension schemes and liability driven investment funds as these are major holders of gilts and may be exposed to material risk of gilt sales during shocks. The CNRF is a collateralised lending facility which will give cash in return for gilts, and pricing will be determined at the point of activation.
3. To maximise effectiveness, firms need to hold more than £2 billion gilts alongside meeting other eligibility criteria.
4. There is an annual fee set at £8,000, which recovers our ongoing costs of running the facility.
5. Firms must be onboarded according to the Bank’s requirements before they can participate in the facility upon its activation. A firm can either access the tool directly or via an appointed representative.
6. For more information on previous speeches and information on the development of this facility see the following links:

• ‘Looking through a glass onion’, speech by Andrew Hauser, March 2023
• ‘A journey of 1000 miles begins with a single step: filling gaps in the central bank liquidity toolkit’, speech by Andrew Hauser, September 2023
• ‘Market resilience, non-bank Financial institutions and the central bank toolkit – practical next steps, speech by Nick Butt, March 2024
• Financial Stability in Focus: The FPC’s approach to assessing risks in market-based finance, (see Section 3.4), October 2023
• Contingent NBFI Repo Facility (CNRF) – Provisional Market Notice, July 2024
• Contingent NBFI Repo Facility (CNRF) – Explanatory Note, July 2024
• ‘Getting the balance right: ensuring the Bank’s balance sheet can support financial stability’, speech by Dave Ramsden, December 2024

7. For more information on eligibility criteria, terms and conditions, the application process and the operation of the facility, please visit our CNRF webpage, CNRF Explanatory Note and CNRF Market Notice.

8. The Bank’s initial area of focus is to design a tool for supporting the gilt market. This reflects the gilt market’s size, interconnectedness with other markets and the real economy, and its importance to financial stability in the UK.