Market Operations Timeline
1979 | 1980 | 1981 | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997
1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014
Operating Framework
Events
Policy Regime
Infrastructure
1979
Official Operations pre October 1979
Before the abolition of exchange control the UK had a floating exchange rate, but restricted some capital transactions by
UK residents.
Domestically, monetary policy aimed to control the growth of broad money, partly through the use of supplementary
special deposits ("the corset") designed to penalise banks whose monetary liabilities grew faster than a prescribed rate.
Influence over market interest rates was exercised by the Bank setting its Minimum Lending Rate, made effective through
its market operations, mainly with the discount houses. Because the houses undertook to underwrite the weekly Treasury
bill tender, by varying the size of the tender the Bank could create a shortage of cash in the money market. The rate at
which the Bank relieved this shortage in its bill operations affected rates in the money market at large.
As banker to the government, the Bank managed the government's cash position and issued its sterling market debt, in
the form of both Treasury bills and gilt-edged stocks.
In the gilt market the Bank was prepared to deal at any time with market makers ("jobbers") on the stock exchange. It did
so at prices close to those prevailing in the market. Periodically the Bank issued new stocks to replenish its portfolio, also
on terms close to those prevailing in the market.
Abolition of UK exchange controls - 24/10/1979
All remaining exchange control restrictions were lifted. This was the third stage in a programme under which virtually all
controls on the financing of direct investment had already been abolished and a start made on the relaxation of controls on
outward portfolio investment. The Bank had been responsible for implementing a range of these controls.
Exchange controls had been in place in the United Kingdom for more than forty years, although the tightness and effect of
the controls had varied over time.
1980
Suspension of 'the corset' - 26/03/1980
The Bank announced the termination of the supplementary special deposits scheme ("the corset") when its current period
of operation ended in June 1980. The corset was a form of quantitative controls on banks' balance sheets, imposing
penalties on banks whose interest-bearing deposits grew faster than a pre-set limit.
Changes to the Bank's money market intervention - Nov 1980
These changes included, amongst others, greater emphasis being placed on open market operations and less on discount
window lending. Operations continued to be conducted in the bill markets, primarily through members of the London
Discount Market Association.
1981
First index-linked gilt issued - 27/03/1981
The Bank issued the first index-linked stock on behalf of HM Treasury, with both principal and interest payments related to
increases in the retail price index.
Eligible holders of the stock were confined essentially to pension providers, in respect of their UK pension liabilities,
avoiding upward pressure on the exchange rate which might have resulted if the stock had been available to foreign
buyers.
The restrictions on who could hold these stocks were subsequently lifted in March 1982.
Bank starts to use wire services - 16/07/1981
The Bank began publishing details of money market conditions on the wire services for the first time e.g. Reuters.
1982
No significant changes this year.
1983
First index-linked convertible stock - 28/04/1983
The Bank announced the issue of a gilt-edged stock of a new kind; an Index-Linked Treasury Convertible Stock. It was a
normal index-linked stock, but with the additional feature that it offered the holder options to convert into a new
conventional stock on any of three conversion dates.
1984
Launch of CHAPS - 09/02/1984
CHAPS, the same-day electronic interbank payment system, was launched. This was a first step towards addressing
settlement risk in the sterling payment systems.
Prior to CHAPS (a credit transfer system), the only means of making high-value same-day payments was via the Town
Clearing, a system using cheques drawn on banks in the City. Migration of payments to CHAPS was actively pursued over
the following years, resulting in the closure of the Town Clearing in February 1995.
1985
End to over-funding - Oct 1985
The Chancellor, Nigel Lawson, announced that sales of debt outside the banking system in any one financial year would
be limited to the amount needed to fund the Public Sector Borrowing Requirement.
1986
Bank opens sterling dealing room - 02/01/1986
The Bank conducted open money operations from its own dealing room for the first time, having for many years used an
agent in the discount market to conduct its money market operations for it.
Central Gilts Office introduced - Jan 1986
The first phase of the Central Gilts Office service was introduced in January 1986, replacing the clerically maintained
certifiable balance accounts in Jobbers' Counter with a computerised system.
The initial service only provided facilities for stock movement rather than a full settlement system and payments continued
to be made directly between the parties concerned outside the service.
Phase 2 of the service, introduced as part of "Big Bang" in October 1986 introduced assured payments arrangements by
providing for irrevocable instructions for payment to be generated simultaneously with the movement of stock between
CGO accounts.
"Big Bang" - 27/10/1986
Minimum commissions were abandoned by Stock Exchange members and, in consequence single capacity operations.
The new gilt-edged market structure ("Big Bang") began on 27 October, replacing the single-capacity structure of separate
jobbers and brokers, with dual capacity gilt-edged market makers (GEMMs) which dealt directly with clients, thus
integrating the trading and sales functions in a single operation.
This change in structure brought an influx of new firms into the gilt market; twenty seven firms began operating as GEMMs
at the time of Big Bang, many of which had acquired existing firms of jobbers and/or brokers. The Bank began to conduct
gilt operations from its own dealing room at this point.
1987
First auction of conventional gilts - 13/05/1987
Following a period of consultation with the market the Bank conducted the first of a series of experimental gilt-edged
auctions to cover part of the Government's funding through conventional stocks. Previously gilts had been sold by the
Bank in small taps and tranchettes over the course of several days.
The result of the auction was sufficiently encouraging to justify a continuation of the experiment and a further three
auctions were held before funding was interrupted in 1988. 1991 saw a return to funding and four auctions were held in
that year.
The hurricane - 16/10/1987
On the morning of Friday 16 October 1987, in the aftermath of a hurricane which struck south-east England the previous
night, there were very few staff present for work in the City and communications were severely disrupted. The Bank
therefore announced that in its view effective clearing settlements could not be conducted and that there seemed no
alternative to postponing settlement until Monday 19 October.
The clearing banks subsequently announced their agreement that they would take no part in clearing sterling cheques or
bankers' payments on 16 October. Accordingly, there were no official money market operations, although the Treasury bill
tender took place as scheduled.
The Bank also announced that it would not be dealing in gilts that day and that gilt-edged market makers were not obliged
to make markets, but could do so if they wished.
Sterling shadows the Deutschemark - 18/03/1987
The Chancellor, Nigel Lawson, introduced an unannounced policy of shadowing the Deutschmark at between DM2.90 and
DM3.00 to the pound. This meant the Bank operated in the foreign exchange markets as required to keep sterling within
that range. This policy continued until March 1988.
1988
First ECU Treasury Bill - 11/10/1988
The Bank issued the first UK Government ECU Treasury Bill on behalf of HM Treasury. These Bills had a maturity of
between 1 and 6 months.
The issuance of these bills had been announced by the Chancellor, Nigel Lawson, in August 1988 as a means of
providing additional flexibility in the management of the UK's foreign currency reserves and to contribute to the use of the
ECU in international financial markets.
Extension of the Bank's dealing relationships in the sterling money market - 24/10/1988
The Bank announced its intention to extend the range of counterparties with which it had a dealing relationship beyond the
members of the London Discount Market Association.
1989
Reverse auction used for first time - 13/01/1989
The Bank conducted a reverse auction to re-purchase the 10% Exchequer Stock 1989 and 11% Exchequer 1989. This
extended the range of techniques available to the Bank for purchasing stock.
Issue department gilt holdings - 06/12/1989
The large volume of official secondary market gilt purchases over the previous two years had led to a sharp increase in
the amount of gilts held by the Issue Department of the Bank. The overall value of Issue Department's assets was
constrained by the size of the Bank's note issue.
In order to ease any consequent constraint on the future official purchases of securities, the Government redeemed early,
then cancelled, £4.5bn of the Issue Department's holdings.
1990
Central Money markets Office opens - 01/10/1990
The Bank opened the Central Moneymarkets Office, a computerised book-entry system for settling money market
transactions in bills, certificates of deposit and commercial paper.
This ended the need for paper documents to be transferred between counterparties, which was open to risk of theft – in
May 1990 a financial messenger was robbed in a quiet City of London side street at knifepoint of £292m worth of bonds he
was delivering.
Sterling joins the Exchange Rate Mechanism - 08/10/1990
The United Kingdom entered the Exchange Rate Mechanism (ERM) with a central rate of 0.696904 against the ECU and
a bilateral central rate against the deutschemark of £1 = DM 2.95; it operated in a wider 6% band (rather than the usual 2
¼% margins).
The ERM was designed to reduce exchange rate variation and achieve monetary stability in Europe. This meant the Bank
was obliged to monitor and operate in the foreign exchange markets as required to keep sterling within its band.
1991
First ECU bond - 13/02/1991
The Bank issued the first UK Government ECU bond on behalf of HM Treasury. The 10 year bond had a coupon of
9.125%. The issue was designed to consolidate London's leading position in the ECU financial markets and to deepen
investment interest in ECU instruments, including among domestic investors.
1992
First ECU Note - Jan 1992
The Bank issued the first UK Government ECU Treasury Note on behalf of HM Treasury. These notes had a maturity of
three years.
Gilt market open on election night - 09/04/1992
The gilt edged market stayed open on election night as did the Bank's gilt-edged dealing room, principally to monitor
developments and ensure an orderly market.
In the event, as the election result became clear, there was substantial demand for gilts which the Bank met,
exceptionally, during the night. Two packages each of £800mn of tranchettes were announced at 2.30am and 8.15am,
both of which sold out very quickly.
Sterling leaves the Exchange Rate Mechanism - 16/09/1992
Following massive rises in official interest rates and intervention on the foreign exchange markets, which failed to move
sterling from its floor in the European Monetary System, it was decided that the prospective cost of defending sterling's
existing parity was prohibitive.
Just after 7.30pm, the Chancellor, Norman Lamont, announced sterling's suspension from the ERM and the EC Monetary
Committee endorsed this judgement when it met later that night. A rise in official rates to 15%, due to take effect the next
day, was cancelled.
Following the exit from the ERM, regular monthly Chancellor-Governor meetings were introduced to assist the Chancellor
in making his interest rate decision.
Repo and secured loan facilities - 18/09/1992
The large sterling money market shortage which resulted from the foreign exchange intervention on 16 September 1992
would have been difficult to relieve using bill purchases alone. The Bank therefore offered temporary facilities whereby it
purchased gilts for future resale and provided finance against export credit and shipbuilding paper.
Despite the introduction of these temporary facilities, the Bank's eligible bill holdings increased sharply, to £10.8bn on 18
September (about half the total eligible bills outstanding at that time). The repo and secured loan facilities were originally
in place for one week only, but they were subsequently re-offered 13 times over the next 16 months. The repo and
secured loan facilities were made permanent in January 1994.
Introduction of inflation targeting - 08/10/1992
In a letter to the Chairman of the Treasury and Civil Service Select Committee, the Chancellor, Norman Lamont, stated
"For the remainder of this Parliament I propose to set ourselves the objective of keeping underlying inflation within a range
of 1-4%".
1993
No significant changes this year.
1994
Minutes of the Chancellor/Governor meetings - 13/04/1994
The Chancellor, Ken Clarke, announced his decision to publish the Minutes of the monthly monetary meetings he held
with the Governor. Minutes of the January, February and March meetings were published on 13 April 1994.
1995
Failure of Barings Bank - 26/02/1995
Following the announcement that Barings Bank was going into administration (as a result of fraudulent activity in its
Singapore subsidiary), the Bank stated that it would "stand ready to provide liquidity to the banking system to ensure that it
continues to function smoothly". In the event, there was no ensuing market disturbance and conditions remained calm.
Report of the Debt Management Review - 19/07/1995
HM Treasury and the Bank issued the report which had been announced by the Minister of State to the Treasury in
November 1994. The report set out new objectives for debt management, with the primary objective being to minimise
over the long term the cost of meeting the Government's funding needs whilst ensuring that debt management policy was
consistent with monetary policy; established a revised funding rule, whereby the Government aimed to sell sufficient gilts
of any maturity, Treasury bills and National savings products to finance the Central Government Borrowing Requirement
(plus maturing debt and any net increase in the official foreign exchange reserves); and announced that henceforth
auctions would constitute the primary means of conventional debt issuance and that an open gilt repo market would be
introduced from January 1996.
1996
Gilt repo market commenced trading - 02/01/1996
The introduction of the gilt repo market was the most significant change to the structure of the gilt-edged market since Big
Bang in 1986, allowing anyone to repo gilts to anyone else for any purpose. In parallel the gilt lending market was
liberalised so that gilt holders now had a choice of lending their stock via intermediaries or directly to borrowers.
Real Time Gross Settlement (RTGS) system introduced - Apr 1996
The Real Time Gross Settlement (RTGS) system went live, having been jointly developed by the Bank, APACS and the
CHAPS settlement banks. The system provided final payment in central bank funds as each individual high value payment
was made between settlement banks. The receiving bank therefore had immediate good funds which could safely be
made available to its customers for immediate use without the risk that the transaction might not settle or might be
unwound.
To support the timely settlement of gross CHAPS transfers, the Bank agreed to provide additional intraday liquidity, via
same-day repos of eligible securities between the CHAPS settlement banks and the Bank. The repos are unwound before
close of business each day. Previously, settlement had occurred through end of day netting which meant settlement banks
could have large unsecured intra-day exposures to each other.
1997
Gilt repo introduced in Bank operations - 03/03/1997
The Bank extended the range of instruments used in its daily operations to include gilt repo and at the same time
broadened the range of counterparties to include active participants in either of the gilt repo and eligible bill markets .
OMOs were conducted at the new official repo rate.
Changes to GEMM requirements - Mar 1997
The Bank withdrew the requirement for GEMMs to be separately capitalised. This enabled GEMMs to assimilate their
businesses into group-wide securities trading operations to benefit from potentially lower regulatory capital requirements,
and to integrate their systems management and control structures more fully with those of the rest of the group.
Most GEMMs took advantage of the ending of the requirement, with only five GEMMs (out of seventeen) remaining
separately capitalised after December 1997.
Bank independence to set interest rates - 06/05/1997
The Chancellor, Gordon Brown, announced the most important institutional and operational changes at the Bank since
nationalisation in 1946.
The Bank was to be given operational responsibility for setting interest rates and banking supervision was to be
transferred to an enhanced Securities and Investments Board (subsequently named the Financial Services Authority). The
Bank would remain responsible for the overall stability of the financial system. Responsibility for debt management was to
be transferred from the Bank to the Treasury.
The Chancellor also announced that the Bank would have its own separate pool of foreign exchange reserves which it
could use at its discretion to intervene in support of its monetary policy objective.
1998
Foreign Exchange Swaps - 29/01/1998
The Bank introduced foreign exchange swaps as an additional tool through which it could supply liquidity to the sterling
money markets.
DMO takes responsibility for Government debt management - 01/04/1998
The Debt Management Office (DMO) assumed full responsibility for managing the Government's sterling debt from the
Bank. This marked the formal separation of debt management from monetary policy.
From 14 January the DMO had assumed responsibility for processing the weekly Treasury bill tender. And, from 14
February, the DMO had undertaken limited bilateral transactions with some of its counterparties with the intention of
smoothing part of the Exchequer component of the Bank's money market forecast.
Widening of access to late borrowing facility - 01/06/1998
A facility previously available to the discount houses to borrow late in the day from the Bank was amended to allow all
Bank counterparties to borrow overnight after the final round of open market operations at 3.30pm. This round of
operations was conducted at a penal rate, initially at 100 basis points above the Bank's repo rate.
Before this change the capacity of the market to borrow late in the day had dwindled, causing occasional late spikes in the
overnight rate. Such spikes disappeared under the new arrangements, with the overnight rate in effect "capped" – only
very rarely trading higher than the Bank's late lending rate after the second and final round of two-week OMOs at 2.30pm.
Extension to eligible collateral - 26/10/1998
The Bank announced that from 26 October 1998 it was extending the collateral it would accept in open market operations
(and in RTGS) to include certain sterling bonds issued by other central governments and international financial institutions.
In due course, the pool of eligible assets was to be widened further to include certain euro-denominated securities issued
by those entities.
1999
Bank joins TARGET and CHAPS Euro launched - 04/01/1999
With the launch of the euro for wholesale financial markets, the Bank joined the EU-wide TARGET RTGS payment system
for euro-denominated cross-border transfers. This required the Bank to operate a euro RTGS system parallel to the
sterling system. At the same time the CHAPS Company launched the CHAPS Euro high-value payment system for
domestic euro interbank transfers, and CRESTCo began offering securities settlement in euro.
The Bank remained a member of TARGET until it closed on 16 May 2006 and was replaced by the TARGET2 system. At
the same time, the CHAPS Euro system was also closed down, and settlement of the CREST Euro DVP service
transferred to the Central Bank of Ireland.
First Bank of England Euro Bill - 13/04/1999
The Bank issued its first Bank of England Euro Bill, marking the start of the process under which the Bank took over from
HM Treasury as the issuer of Euro Bills (which had been redenominated from ECUs in early 1998). The proceeds were
used to finance the provision of intra-day liquidity to participants in CHAPS euro, as part of the arrangements for TARGET.
Gold sales - 07/05/1999
HM Treasury announced plans to rebalance the United Kingdom's gold and foreign exchange reserves, reducing the
amount of gold in the reserves and increasing the amount of foreign currency, through the sale of some 415 tonnes of
gold over a number of years. Upon completion of these sales, HM Treasury intended to retain 300 tonnes of gold in the
reserves portfolio.
During the financial year 1999/2000, the Bank conducted a series of five auctions selling 25 tonnes of gold at each. The
first of the auctions, which were held on a single or uniform price basis, was held in July 1999. Thereafter auctions were
held at approximately two-month intervals until March 2002. There were 17 auctions in all: approximately 395 tonnes of
gold were sold at an average price of around $275 an ounce.
Extension of collateral in OMOs - Aug 1999
The Bank extended the range of collateral eligible in sterling OMOs in three stages. The process began in autumn 1998,
when certain sterling and euro denominated bonds were accepted in the Bank's operations.
In the second stage, from 28 June 1999, the Bank extended the securities it accepted to include a range of bonds issued
by other central governments in the European Economic Area and the major international institutions, where they had
been issued directly into the Euroclear and Cedel settlement services. The Bank accepted bonds issued by those bodies
denominated in sterling and denominated in euro where they were eligible for use in the ESCB monetary policy
operations.
The third, and largest, phase of collateral extension took effect at the end of August 1999. The pool of securities was
extended to include securities denominated in euro issued by the central governments and central banks of the countries
of the EEA which were eligible for use in ESCB monetary policy operations, where the central bank in the country in which
the relevant securities were issued had agreed to act as the Bank's custodian under the Correspondent Central Banking
Model. The third phase expanded the range of collateral more than six fold, to more than £2 trillion.
Central Moneymarkets Office service transferred to CREST - 20/09/1999
Responsibility for the operation of the Central Moneymarkets Office service was transferred to CREST, although the
depository function - required because money market instruments were in paper form - continued to be operated by the
Bank on behalf of CRESTCo.
Year 2000 preparations - Oct 1999
To provide help to market participants in planning their liquidity management over the Y2K period as a whole, the Bank put
in place a temporary facility for longer term repos to run from October 1999 through to the early months of 2000.The
facility enabled the Bank's counterparties to obtain liquidity from the Bank, on repo against eligible collateral, for periods of
up to three months. The rate of interest charged on amounts taken under the facility was indexed to Bank Rate.
2000
DMO takes responsibility for Government cash management - 03/04/2000
The Debt Management Office (DMO) assumed full responsibility for managing the Government's daily cash position. The
cash management transfer necessitated a change to the Bank's method of absorbing money market surpluses: instead of
issuing Treasury bills (undertaken by the DMO), the Bank now drained any market surpluses by a short-maturity gilt repo,
executed via a competitive rate tender.
Gilt settlement transferred to CREST - Jul 2000
Gilts settlement migrated from the Central Gilts Office to CREST, the UK system for electronic transfer and settlement of
dematerialised equities. This was a step towards the aim of a single settlement system for gilts, money market instruments
and equities.
FX Intervention in the euro - 22/09/2000
The G7 countries intervened in the foreign exchange markets, buying euros. The G7 summarised its activities in the
following statement: ‘At the initiative of the European Central Bank, the monetary authorities of the United States, Japan,
the United Kingdom, and Canada, joined with the European Central Bank on Friday 22nd September in co-ordinated
intervention in exchange markets, because of the shared concern of Finance Ministers and Governors about the potential
implications of the recent movements in the euro for the world economy. In light of recent developments, we will continue
to monitor developments closely and to co-operate in exchange markets as appropriate'.
2001
First Bank of England Euro Note - 16/01/2001
The Bank issued its first Bank of England Euro Note, marking the start of the process under which the Bank took over from
HM Treasury as the issuer of Euro Notes (which had been redenominated from ECUs in early 1998). The notes were held
on the Bank's balance sheet as foreign exchange assets.
Liquidity Withdrawal Facility - 27/06/2001
The Bank supplemented its open market operations with a daily collateralised liquidity withdrawal facility (in effect, an
overnight deposit facility). This was designed to moderate the extent to which overnight market interest rates traded below
the Bank's two-week repo rate. The Bank already had in place an overnight lending facility, which helped limit the extent to
which overnight rates traded above the Bank's repo rate.
9/11 - 11/09/2001
In the wake of the terrorist attacks in the US on 11 September the G7 Central Bank Governors, in a joint statement with
G7 Finance Ministers, indicated that they would "provide liquidity to ensure that financial markets operate in a normal
fashion". The Federal Reserve, European Central Bank and Bank of Japan provided additional liquidity while the Bank of
England continued to provide the market's sterling liquidity needs with cash rates suggesting little evidence of cash
pressures at that time.
The ECB, Bank of England and Bank of Canada announced that they had agreed temporary swap facilities with the
Federal Reserve under which their domestic currencies could be swapped for US dollars in order potentially to facilitate
US dollar settlements in their domestic banking systems.
Introduction of DvP in CREST - Nov 2001
CREST introduced real-time Delivery versus Payment (DvP) as a way of settling security transactions. The method of
settlement removed intra-day exposures between counterparties where one party to a transaction could hold both the
security and cash at the same time. To support the real-time settlement in CREST, the Bank began to provide intraday
liquidity to the CREST settlement banks using a process called self- or auto-collateralisation. In this a member's purchase
of eligible securities are repoed on a same-day basis to the Bank in return for intraday liquidity, the process unwinding
before close of business each day.
2002
Continuous Linked Settlement Bank launched - 09/09/2002
The Continuous Linked Settlement Bank (CLSB) began live operations, settling foreign exchange operations between
seven major currencies, including sterling, settling foreign exchange transactions in a five hour window. CLSB holds
accounts with respective central banks and uses their RTGS payments systems to make and receive payments.
Dematerialisation of money market instruments - Oct 2002
The final stage of the work programme begun in the late 1990s to reduce risk in the UK payment and settlement systems
was completed, when the remaining paper money market instruments were migrated from the Central Money Markets
Office (CMO) to CREST; the CMO was closed on 16 October. As a result of the migration, all UK securities, whether gilts,
other bonds, equities or money market securities were now settled on the single CREST platform and infrastructure.
News Release – MMI Migration Marks Completion of UK Securities Settlement Consolidation (48KB)
16 October 2003
2003
UK Government US Dollar Bond Issue - 23/06/2003
The Bank, on behalf of HM Treasury, announced the issue by the UK Government of a $3 billion 5-year eurobond, to be
sold in the international bond market. The issue was being undertaken as part of the ongoing financing of the UK's foreign
currency reserves.
News Release - UK Government US Dollar Bond Issue (39KB)
23 June 2003
2004
Introduction of a minimum ratings requirement for collateral - 04/05/2004
The Bank introduced a requirement that in order to be eligible for use as collateral in its OMOs, bonds issued by EEA
sovereigns or international organisations should be rated Aa3 (on the Moody's scale) or higher by two or more of the
major ratings agencies.
Closure of Bank Registrar's Department - 20/12/2004
At the end of 2004 the gilt registration and transfer functions undertaken by the Bank's Registrar's Department in
Gloucester were successfully moved to a new service provider; HM Treasury continued to be responsible for ensuring that
the service was provided. The transfer brought to a close the Bank's history as a registrar, which could be dated back to
its foundation in 1694.
2005
Collateral Concentration Limits introduced - 01/03/2005
The Bank introduced a limit on the amount of collateral from a single issuer (excluding HM Government and the Bank of
England) that a participant could hold with the Bank at any one time.
US Treasuries eligible as contingency collateral - 01/03/2005
The Bank announced that at its discretion, it would accept US Treasuries as collateral in addition to the normal eligible list
if there were exceptional circumstances. This was to give more flexibility in response to problems late in the London
business day, as US Treasuries could be settled later in the US day. At the same time, the Bank announced that Local
Authority bills were no longer eligible as collateral.
Interim sterling money market reforms - 14/03/2005
Ahead of the full implementation in May 2006, interim reforms to the Bank sterling money markets were introduced: a
narrowing of the rate "corridor" on the Bank's deposit and late lending facilities from 100 to 25 basis points above and
below Bank Rate; indexing of the rate charged on the Bank's daily two-week repos to Bank Rate ; and no longer
purchasing bills outright in the Bank's open market operations.
News Release – Interim Reforms to the Bank of England's Operations in the Sterling Money Markets (46KB)
11 February 2005
7 July London bombings - 07/07/2005
On the morning of 7 July, there were four explosions on public transport in Central London. This was followed by four
attempted bombings on 21 July 2005. On 7 July one infrastructure provider and one other financial institution evacuated
their offices while some banks decided to switch trading temporarily to other centres. The sterling payments system
operated without interruption and the Bank was able to conduct its routine operations without problems.
Alignment of collateral eligibility - 25/07/2005
The collateral lists for use for intra-day credit in its sterling real-time gross settlement (RTGS) payment system and in the
Bank's Open Market Operations (OMOs) were aligned for operational simplicity.
Bankers' acceptances no longer eligible as collateral - 17/08/2005
Following a six month transition period, Bankers' acceptances ceased to be eligible in the Bank's operations. The Bank
had discounted bills since shortly after its foundation in 1694 and had established a discount mechanism as a means of
controlling the market in 1890, when it granted discount facilities to the discount houses, the market makers in bills.
It has been estimated that in the peak years of the 1860s the value of bills drawn amounted to about 170% of net national
income. However, the use of eligible bankers' acceptances in the operations had declined to the point where they formed
an insignificant part of the Bank's overall collateral pool; by late 2004 the size of the eligible bill market had fallen below
£1bn compared with £18bn in 1998.
2006
Long-term repo operations launched - 17/01/2006
The Bank held its first regular long-term repo operation, intended to help manage the Bank's balance sheet ahead of the
introduction of reserve averaging (June 2006). The new long-term repo operations were conducted monthly at maturities
of three, six, nine and twelve months in "pay as you bid" competitive tenders.
Start of new framework for implementation of monetary policy - 18/05/2006
The Bank began to pay interest on reserve balances held by banks and building societies. The banks targeted average
balances with the Bank over the periods between the MPC's monthly interest rate decisions (‘Maintenance Periods') rather
than having to ‘square up' every day. The Bank also moved from daily to weekly short-term open market operations.
News Release - Launch of New Framework to Modernise Sterling Money Markets (55KB)
18 May 2006
Change of financing of Bank foreign exchange reserves - 15/12/2006
The Bank announced that it planned to issue medium-term securities on an annual basis to fund its own foreign exchange
reserves in support of its monetary policy objective. This would be done with a regular timetable, a high degree of
transparency and a group of banks to market and distribute each issue. This replaced the previous Euro Note programme
which had been run by the Bank since January 2001.
News Release - Market Notice: Bank of England Foreign Currency Reserves (19KB)
15 December 2006
2007
First Bank of England dollar bond issued - 13/03/2007
The Bank launched a $2 billion 3-year Eurobond, issued in its own name, the first annual issuance in its programme to
finance the Bank of England's foreign currency reserves.
Market Notice - Bank of England Foreign Currency Reserves
13 March 2007
Provision of additional reserves - Sep 2007
Following the run on Northern Rock, the Bank supplied additional reserves in open market operations to meet the markets'
increased demand. To accommodate the additional reserves supplied within the reserves averaging framework, the Bank
widened the range around banks' reserve targets on which it would pay Bank Rate.
Term auctions introduced - 26/09/2007
The Bank held the first of four special auctions to lend cash for three months against a much wider range of collateral than
that used in its regular operations. This was the first time that the Bank had accepted anything other than the highest
quality collateral in its liquidity providing operations. There was no take up by the market in any of the four operations.
Market Notice – Term Auctions (50KB)
21 September 2007
Electronic tendering used for the first time - 22/11/2007
The Bank held the first "extended collateral", three month long-term repo operation, where counterparties could bid for
reserves against either collateral routinely eligible in the Bank's OMOs or against a broader set of collateral. The size of
these operations peaked at £180bn in January 2009.
First extended long-term repo operation - 18/12/2007
The Bank held the first "extended collateral", three month long-term repo operation, where counterparties could bid for
reserves against either collateral routinely eligible in the Bank's OMOs or against a broader set of collateral. The size of
these operations peaked at £180bn in January 2009.
Market Notice – Long-term Repo Operations (28KB)
14 December 2007
2008
First Gilt purchases made to back Banknotes - 28/01/2008
The Bank purchased gilts in an Open Market Operation for the first time to provide reserves on a longer-term basis, and
provide a long-term asset to hold against the Bank's banknote liability.
Special Liquidity Scheme announced - 21/04/2008
The Bank announced the launch of the Special Liquidity Scheme to allow banks to swap temporarily their high quality, but
currently illiquid, mortgage-backed and other securities for UK Treasury bills. Peak usage of the scheme was £185bn at
the point that the drawdown window closed in January 2009.
Special Liquidity Scheme
Launch of DWF and OSFs - 20/08/2008
The Bank launched the Discount Window Facility (DWF) which enabled banks to borrow UK government securities
against a wide range of collateral, at any time, for a fee. The aim of the facility was to provide liquidity insurance to banks
in the event of stress.
Operational Standing Facilities (OSFs) replaced the Bank’s Standing Facilities. OSFs had two roles: to assist in the
implementation of monetary policy by preventing market rates moving far away from Bank Rate; and to provide a way of
allowing banks to manage unexpected payment shocks.
These facilities were launched alongside a market consultation on aspects of the Bank’s sterling operations.
Liquidity Insurance US Dollar repo operations introduced - 18/09/2008
Alongside other central banks, in response to pressures in US dollar short-term funding markets, the Bank conducted its
first US Dollar operation, lending dollars overnight.
US Dollar Repo Operations Minimum bid rates in extended long-term repo operations - 03/10/2008
The Bank introduced separate minimum bid rates depending on whether counterparties were bidding to deliver narrow or
wider collateral.
Bank of England bills introduced - 08/10/2008
Following the large provision of reserves through the increased size of three month long-term repo operations, the Bank
issued own name sterling bills for the first time to drain reserves from the market on a weekly basis.
Special MPC meeting - 08/10/2008
In response to the financial crisis, the MPC convened a day earlier than scheduled and agreed to reduce Bank Rate by 50
basis points, as part of a co-ordinated easing in monetary policy, in conjunction with the Bank of Canada, the European
Central Bank, the US Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank of Japan.
Collateral eligibility changes - Autumn 08
Over the course of the Autumn, in response to the worsening liquidity in certain asset classes, the Bank increased the
range of wider collateral eligible in its extended long-term repo operations:
3 October - CMBS and Corporate Debt
8 October - Government Guaranteed Bank debt
18 December - RMBS and Covered bonds.
2009
Commercial Paper Facility launched - 13/02/2009
The Bank began to purchase Commercial Paper via its Asset Purchase Facility, to help channel funds directly to parts of
the corporate sector whilst also supporting secondary market activity and helping to remove obstacles to corporate access
to capital markets.
Asset Purchase Facility
Introduction of Quantitative Easing - 05/03/2009
The Bank announced a programme of asset purchases, known as Quantitative Easing. The initial target was to purchase
£75bn of assets over the course of 3 months. The majority of the purchases were to be of medium and long-term
conventional gilts, in the secondary market. At the same time the system of reserves averaging was suspended, and all
reserve account balances at the Bank earned Bank Rate.
What is Quantitative Easing? Variable rate short-term OMOs introduced - 12/03/2009
The Bank's weekly Open Market Operations (OMOs) were changed from fixed rate to variable rate. If successful,
counterparties paid the rate they offered.
Corporate bond purchases introduced - 25/03/2009
The Bank began purchasing high quality corporate bonds via its Asset Purchase Facility, to facilitate secondary market
activity, help reduce liquidity premia on high quality corporate bonds and so improve firms' access to capital markets.
Asset Purchase Facility
Secured Commercial Paper facility launched - 03/08/2009
The Bank launched a secured commercial paper facility via its Asset Purchase Facility to support the provision of working
capital to non-investment grade companies that were ineligible for the Bank's commercial paper facility.
Asset Purchase Facility
Suspension of short-term OMOs - 06/08/2009
In the light of the revealed demand for reserves, the Bank announced that it would amend its approach to the provision of
reserves. The Bank continued to offer reserves in long-term repo operations but ceased to offer reserves in weekly shortterm Open Market Operations (OMOs).
Market Notice – Sterling Monetary Framework (16KB)
6 August 2009
Gilt lending introduced - 07/08/2009
To relieve frictions in the functioning of the gilt market arising from the Bank's Quantitative Easing purchases, the Bank
made available to the DMO a significant proportion of the gilts purchased, so the DMO could lend them to the market
through the DMO's normal repo market activity.
Joint Bank-DMO Statement on Gilt Lending (12KB)
6 August 2009
Changes to eligible institutions - 05/10/2009
The Bank announced that it had widened the population of institutions eligible to apply for reserves accounts in order to
assist smaller institutions in managing their liquidity. This substantially increased the number of entities eligible to apply.
Market Notice: Changes to the eligibility criteria for access to reserves accounts and other sterling monetary
framework facilities (18KB)
5 October 2009 2010
Corporate bond sales introduced - 08/01/2010
The Bank held its first operation offering to sell corporate bonds from the Asset Purchase Facility with the intention of
improving secondary market liquidity.
Asset Purchase Facility
Indexed long-term repos introduced - 15/06/2010
The Bank conducted the first operation of its permanent indexed long-term repo facility. This was designed to enable
funds to be lent against different types of collateral depending on the degree of stress in the system.
Indexed Long-Term Repo Open Market Operations European Central Bank Swap Line Agreement - 17/12/2010
The Bank and European Central Bank (ECB) announced a temporary reciprocal swap agreement (swap line) as a
precautionary measure to enable the ECB to provide sterling liquidity to its counterparties. If requested, the Bank would
provide the ECB with sterling in exchange for euro up to a limit of £10bn.
2011
FX Intervention in the Yen market - 18/03/2011
Following the earthquake and tsunami which hit Japan the previous week, the G7 group of industrial nations announced a
concerted intervention in foreign exchange markets.
In a joint statement they said "We express our solidarity with the Japanese people in these difficult times, our readiness to
provide any needed cooperation and our confidence in the resilience of the Japanese economy and financial sector... As
we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for
economic and financial stability. We will monitor exchange markets closely and will cooperate as appropriate."
Loans as collateral in DWF - 01/04/2011
Following a consultation with market participants, portfolios of loans meeting certain criteria became eligible as collateral in
the Bank's Discount Window Facility.
Collateral eligibility changes - 01/07/2011
The Bank implemented changes to the collateral eligible in its OMOs such that the narrow collateral set would only include
those securities which in the Bank’s view were likely to remain liquid in all but the most extreme circumstances, and issued
by sovereigns with sufficiently deep debt markets to facilitate broad access to the Bank’s operations.
Other sovereign and supranational debt which were previously eligible as narrow collateral would remain eligible in the
Bank’s operations, but only as wider collateral, consistent with the purpose of wider collateral of providing liquidity
insurance to the banking system. The revisions reflected the Bank’s long-term review of its collateral policy, which was
initiated following the October 2008 consultative paper on the Bank’s market operations.
Market Notice – Revisions to eligibility criteria for sovereign, central bank and supranational debt taken as
collateral in the Bank of England’s operations (81KB)
11 February 2011
Resumption of Quantitative Easing - 10/10/2011
The MPC announced that a further £75bn of gilt purchases would be undertaken as part of its programme of asset
purchases financed by central bank reserves, taking the total to £275bn. The gilts eligible for purchase remained
unchanged and the purchases were to take four months to complete.
What is Quantitative Easing? Introduction of the ECTR Facility - 06/12/2011 The Bank announced the introduction of the Extended Collateral Term Repo (ECTR) Facility. The ECTR Facility is a
contingency liquidity facility that the Bank can activate in response to actual or prospective market-wide stress of an
exceptional nature. The ECTR facility enables the Bank to undertake operations, normally for a term of 30 days, against a
much wider range of collateral than is eligible in the indexed long-term repo operations.
Extended Collateral Term Repo Facility 2012
ECTR activated - 15/06/2012
The Bank announced the activation of the Extended Collateral Term Repo (ECTR) Facility which is a contingency liquidity
facility designed to respond to actual or prospective market-wide stress of an exceptional nature. ECTR auctions for at
least £5bn are to be held at least once a month until further notice.
News Release - Auctions to be held under the Extended Collateral Term Repo Facility
15 June 2012
Funding for Lending Scheme launched - 13/07/2012
The Bank and HM Treasury launched the Funding for Lending Scheme (FLS) which is designed to incentivise banks and
building societies to boost their lending to UK households and non-financial companies.
Funding for Lending Scheme 2013
MPC remit changed - 20/03/2013
The inflation target was reconfirmed at 2 percent measured by the 12-month increase in the Consumer Prices Index (CPI).
The new remit recognises that inflation will on occasion depart from its target as a result of shocks and disturbances.
Attempts to keep inflation at the target in these circumstances may cause undesirable volatility in output. It therefore
allows for a balanced approach to the objectives set out in the remit, while retaining the primacy of price stability and the
inflation target.
MPC Remit Letters
Funding for Lending Scheme extended - 24/04/2013
The Bank and HM Treasury announced an extension of one year to the Funding for Lending Scheme (FLS) until January
2015, with incentives to boost lending skewed towards small and medium sized enterprises (SMEs). The FLS will also be
expanded to count lending by banking groups involving certain non-bank providers of credit to the UK real economy.
News Release - Bank of England and HM Treasury announce extension to the Funding for Lending Scheme
24 April 2013
GBP/RMB swap line agreement - 22/06/2013
Governor Zhou Xiaochuan and Governor Mervyn King agreed to facilitate discussions on the establishment of a reciprocal
3 year, renminbi (RMB)/sterling currency swap arrangement on 22 February 2013. The agreement was signed on 22 June
2013. The maximum value of the swap is RMB 200bn.
News Release - People’s Bank of China swap line 22 June 2013
Forward Guidance Announced - 07/08/2013
At its meeting on 1 August, the Bank of England’s Monetary Policy Committee (MPC) voted to provide some explicit
guidance regarding the future conduct of monetary policy.
News Release - Bank of England provides explicit guidance regarding the future conduct of monetary policy
7 August 2013
Developments in liquidity insurance - 24/10/2013
Alongside a speech by the Governor, the Bank of England announced changes to its approach to providing liquidity
insurance to the banking system.
Mark Carney: Speech as part of the Financial Times 125th anniversary celebrations, London
24 October 2013
Central banks announce standing swap arrangements - 31/10/2013
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the
Swiss National Bank announced that their temporary bilateral liquidity swap arrangements were being converted to
standing arrangements.
News Release - Central banks announce standing swap arrangements
31 October 2013
Funding for Lending Scheme extension changes announced - 28/11/2013
The Bank of England and HM Treasury announced changes to the terms of the Funding for Lending Scheme (FLS)
extension to re-focus the incentives in the scheme towards supporting business lending in 2014. The first phase of the
FLS remained unaffected.
News Release - Bank of England and HM Treasury re-focus the Funding for Lending Scheme to support business
lending in 2014
28 November 2013
2014
Launch of new ILTR operation - 16/01/2014
Following the Governor's announcement in the previous October, the Bank of England launched a new regular marketwide Indexed Long-Term Repo (ILTR) operation against Level A, B and C collateral with a maturity of six months.
News Release - Launch of new Indexed Long-Term Repo operations 16 January 2014
Expansion of eligibility of securities guaranteed by UKEF as collateral in the Bank's facilities - 07/04/2014
UK Export Finance-guaranteed debt capital market notes issued under pro forma documentation and processes that have
been agreed between UKEF and the Bank of England became eligible for the Bank of England's Sterling Monetary
Framework.
Mark Carney: Speech as part of the Financial Times 125th anniversary celebrations, London 24 October 2013 Changes to weekly reporting - 30/06/2014
The Bank of England announced that it will be replacing the Bank Return publication with a new Weekly Report from the
beginning of October 2014.
News Release - Changes to the Bank Return
30 June 2014
Expansion of Sterling Monetary Framework access to broker-dealers and central counterparties – 05/11/2014
The Bank of England widened access to its Sterling Monetary Framework to accept broker-dealers deemed critical to the
stability of the UK financial system (designated investment firms) and central counterparties that operate in UK markets
and are either authorised under EMIR or recognised by ESMA.
News Release - Widening access to the Sterling Monetary Framework: broker-dealers and central counterparties