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Home > Publications > Quarterly Bulletin 2014 Q3

Quarterly Bulletin 2014 Q3

Contents of Quarterly Bulletin 2014 Q3

Each article is available as a separate pdf file; click on the appropriate title to access the relevant file. Alternatively you may download the complete issue.

Complete issue (2.13MB)

Topical articles
Innovations in payment technologies and the emergence of digital currencies (339KB)
By Robleh Ali of the Bank’s Financial Market Infrastructure Directorate, John Barrdear of the Bank’s Monetary Assessment and Strategy Division, and Roger Clews and James Southgate of the Bank’s Markets Directorate.
Modern electronic payment systems rely on trusted, central third parties to process payments securely. Recent developments have seen the creation of digital currencies like Bitcoin, which combine new currencies with decentralised payment systems. Although the monetary aspects of digital currencies have attracted considerable attention, the distributed ledger underlying their payment systems is a significant innovation. As with money held as bank deposits, most financial assets today exist as purely digital records. This opens up the possibility for distributed ledgers to transform the financial system more generally. 

A short video discusses some of the key topics from this article. 



By Robleh Ali of the Bank’s Financial Market Infrastructure Directorate, John Barrdear of the Bank’s Monetary Assessment and Strategy Division, and Roger Clews and James Southgate of the Bank’s Markets Directorate.
Although digital currencies could, in theory, serve as money for anybody with an internet-enabled device, at present they act as money only to a limited extent and only for relatively few people. The economics of the schemes as currently designed, both in terms of individuals’ incentives and at a macroeconomic level, pose significant challenges to their widespread adoption. Digital currencies do not currently pose a material risk to monetary or financial stability in the United Kingdom. The Bank continues to monitor developments in this area.
A short video discusses some of the key topics from this article. 



By Rashmi Harimohan of the Bank’s Monetary Assessment and Strategy Division and Benjamin Nelson of the Bank’s Prudential Policy Directorate.
Macroprudential capital policy is designed to make the financial system more resilient and reduce the likelihood and severity of financial crises. In doing so, it can have an impact on credit conditions and economic growth more generally. This article considers the effects on credit conditions over the near term. The direction and magnitude of those effects are likely to depend crucially on the state of the financial system and the economy as well as the way in which banks, financial investors and borrowers respond to changes in macroprudential capital policy. 

By Philip Bunn of the Bank’s Structural Economic Analysis Division and May Rostom of the Bank’s Banking System Division.
This article is the first study to use microdata to assess the role of debt levels in determining UK households’ spending patterns over the course of the recent recession. There is evidence that high levels of household debt have been associated with deeper downturns and more protracted recoveries in the United Kingdom. Cuts in spending associated with debt are estimated to have reduced the level of aggregate private consumption by around 2% after 2007, unwinding the faster growth in spending by highly indebted households, relative to other households, before the financial crisis. 

By Ed Kelsey and Simon Rickenbach of the Bank’s Market Services Division.
The Bank of England operates the United Kingdom’s Real-Time Gross Settlement (RTGS) infrastructure for the settlement of the main electronic sterling payment systems. This infrastructure plays a vital role in the safe functioning of the UK financial system, and therefore in maintaining financial stability. The Bank continuously seeks to improve the resilience of its infrastructure. Recently, enhancement of the resilience of payment infrastructure has become a higher priority for central banks. The Bank, together with other central banks, worked with SWIFT to develop a new RTGS contingency infrastructure with which to settle payments should the principal infrastructure become unavailable. The Bank is the first central bank to adopt this contingency solution.
Recent economic and financial developments

Markets and operations (147KB)
UK short-term interest rate expectations implied by the forward curve declined a little over the review period, following the release of the August 2014 Inflation Report. Euro-area short-term interest rates fell relative to their UK counterparts, reflecting a combination of loosening of monetary policy by the ECB and weaker-than-expected economic data. Sterling rose early in the review period, briefly reaching a new post-crisis high. The currency subsequently depreciated, broadly consistent with moves in international interest rates. Geopolitical risks remained a key concern for market participants and contributed to a brief sell-off in risky assets, although much of this subsequently unwound. 

On Friday 16 May 2014, the Bank of England’s Legal Directorate, in association with the Centre for Commercial Law Studies at Queen Mary, University of London, hosted its second annual Conference on Monetary and Financial Law. The four main sessions covered: (i) taking stock of the international regulatory reform agenda; (ii) divergent approaches in regulatory law — centralisation and diversity; (iii) resolution as the fourth pillar of Basel III; and (iv) alternative currencies, payment systems and finance providers. 

Summary of the twelfth Monetary Policy Roundtable hosted by the Bank of England and the Centre for Economic Policy Research (CEPR) on 3 July. There were two topics of discussion: what impact might a reduction in the stock of assets held by the Asset Purchase Facility (APF) have on the UK economy? And how worried should the Monetary Policy Committee (MPC) be about the United Kingdom’s current account deficit? 

Changes to the Bank’s weekly reporting regime (582KB)
The financial crisis underlined the trade-off that exists between being transparent and open at all times and seeking to maintain financial stability. This article explains how the current Bank Return is being replaced with a new publication that will include additional detail across some parts of the Bank’s balance sheet but omit data relating to bilateral operations. This will allow the Bank to carry out such operations but disclose them with a delay, while moving towards a more modernised approach to reporting. 

Summaries of speeches and working papers
Bank of England speeches (65KB) 

Summaries of recent Bank of England working papers (73KB)


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