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Home > News and Publications > Quarterly Bulletin 2015 Q2
 

Quarterly Bulletin 2015 Q2

News Release

Quarterly Bulletin 2015 Q2

Contents of the Quarterly Bulletin

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 (3.51MB)

Topical articles

By Oliver Burrows and Katie Low of the Bank’s Macro-financial Risks Division and Fergus Cumming of the Bank’s Monetary Assessment and Strategy Division.
The United Kingdom’s financial system is large and has grown rapidly in recent decades. Understanding its structure is an important starting point for a wide range of policy questions. One way into this is through the balance sheets of financial firms. This article paints a picture of the financial system by exploring those balance sheets, first using data currently available and then looking ahead to new avenues of research that should further improve our understanding.
 
A short video discusses some of the key topics from this article.
 
 
By Zijun Liu of the Capital Markets Division, Stephanie Quiet previously of the Banking and Insurance Analysis Division and Benedict Roth of the International Banks Directorate.
Banks can be connected to each other in a number of ways. Greater interconnectedness means that stresses tend to spread more rapidly and extensively across the financial system. Various regulatory initiatives have been introduced to mitigate financial stability risks arising from interconnectedness. On some measures, such as interbank credit exposures, interconnectedness has decreased materially since the financial crisis.

 

By Robin Swain and David Swallow of the Bank’s Prudential Policy Directorate.
Solvency II is a new regime for the prudential regulation of European insurance companies that will come into force on 1 January 2016. It will modernise the existing regulatory framework, with the objective of providing an enhanced and more consistent level of protection for policyholders across Europe. Solvency II introduces features to improve a firm’s understanding and management of its risks, which should result in improved resilience to shocks.
 
A short video discusses some of the key topics from this article.

 
By Fabrizio Cadamagnani of the Banking and Insurance Analysis Division, Rashmi Harimohan of the Bank’s Monetary Assessment and Strategy Division and Kumar Tangri of the Risk Infrastructure, Liquidity and Capital Division.
Banks determine the interest rates on loans and deposits through an internal pricing approach that seeks to take account of the relevant costs and risks of their business. This article focuses on ‘funds transfer pricing’ (FTP), a key component of banks’ internal pricing methodologies. It discusses issues in some banks’ FTP practices, the impacts of economic and regulatory developments on FTP, and some potential implications for monetary and financial stability.

 

By Sílvia Domit and Chris Jackson of the Bank’s Monetary Assessment and Strategy Division and Matt Roberts-Sklar of the Bank’s Macro Financial Analysis Division.
People’s expectations about future inflation play an important role in determining the current rate of inflation and so in the Monetary Policy Committee (MPC) meeting its remit. Measures of inflation expectations at both short and longer horizons have generally fallen over the past year. Despite that, most indicators are broadly consistent with expectations remaining anchored to the MPC’s inflation target. Lower inflation expectations could lead to weak inflation becoming more persistent, although there are few signs that weaker inflation expectations have weighed significantly on inflation over the recent past.

 

By Tarkus Frost, Nick Govier and Tom Horn of the Bank’s Sterling Markets Division.
The Bank’s liquidity insurance facilities have been consistently improved since the onset of the financial crisis. The most innovative of these facilities is the Indexed Long-Term Repo (ILTR). In designing the ILTR, the Bank has drawn on lessons from auction theory. A key feature is that the provision of liquidity via the ILTR adjusts automatically to increases in demand caused by liquidity stresses in the financial system.

 

Recent economic and financial developments

This article reviews developments in financial markets between the 2015 Q1 Quarterly Bulletin and 3 June 2015. It goes on to describe the Bank’s own operations within the Sterling Monetary Framework and other market operations.

 

Report

This article reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2014.

 

Summaries of speeches and working papers

 

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