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Home > News and Publications > Summary of Quarterly Bulletin 2012 Q4

Summary of Quarterly Bulletin 2012 Q4

18 December 2012
Contents of Quarterly Bulletin 2012 Q4 

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.
Recent economic and financial developments
Markets and operations (312k)
This article reviews developments in financial markets, including the Bank’s official operations, between the 2012Q3 Quarterly Bulletin and 26November 2012.  The article also summarises market intelligence on selected topical issues relating to market functioningThis edition focuses on issues surrounding the move toward clearing of over-the-counter derivatives through central counterparties (CCPs), and on the recent trend for repo market transactions to move away from CCPs.
Research and analysis
Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank, MPC or FPC members.
The Funding for Lending Scheme (127k)
By Rohan Churm and Amar Radia of the Bank’s Monetary Assessment and Strategy Division, Jeremy Leake of the Bank’s Financial Institutions Division, Sylaja Srinivasan of the Bank’s Data and Statistics Division and Richard Whisker of the Bank’s Sterling Markets Division.

The Bank of England and HM Treasury launched the Funding for Lending Scheme (FLS) in order to encourage lending to households and companies.  The FLS offers funding to banks and building societies for an extended period.  And it encourages them to supply more credit by making more and cheaper funding available if they lend more.  Easier access to bank credit should boost consumption and investment by households and businesses.  In turn, increased economic activity should raise incomes.  Early signs have been encouraging, as funding costs for UK banks have fallen sharply.  But it will be some time before the impact of the FLS on lending is clear.  The Bank is monitoring a range of indicators in order to assess the direct and indirect impacts of the Scheme.
What can the money data tell us about the impact of QE? (486k)
By Nicholas Butt, Sílvia Domit, Michael McLeay and Ryland Thomas of the Bank’s Monetary Assessment and Strategy Division and Lewis Kirkham of the Bank’s Data and Statistics Division.

This article reviews the main influences on broad money growth since the onset of the global crisis, focusing on the impact of the Monetary Policy Committee’s asset purchase programme (QE).  The underlying weakness in money growth is likely to have reflected a combination of reduced nominal demand and a restructuring of banks’ balance sheets.  QE has played a key role in offsetting some of this weakness and in a way that has not depended on an increase in bank lending.  The first two rounds of QE seem to have had a similar proportionate impact on the money supply, but there is some evidence that the transmission mechanism of QE may have been different over the two episodes.
Influences on household spending:  evidence from the 2012 NMG Consulting survey (88k)
By Philip Bunn and Jeanne Le Roux of the Bank’s Structural Economic Analysis Division, Robert Johnson of the Bank’s Risk Assessment Division and Michael McLeay of the Bank’s Monetary Assessment and Strategy Division.

A number of factors are likely to have restrained household spending growth over the recent past, including weak income growth, tight credit conditions, concerns about debt levels, the fiscal consolidation and uncertainty about future incomes.  This article examines the factors affecting spending and saving decisions using the latest survey of households carried out for the Bank of England by NMG Consulting.  Real incomes have been squeezed.  Concerns about debt levels and tight credit conditions appear to be important factors supporting saving.  But many households are also uncertain about their future incomes and have been affected by the fiscal consolidation.  Over the next year, households do not expect to change the amount they save significantly, with the same factors that have supported saving recently continuing to be important.
The role of designated market makers in the new trading landscape (119k)
By Evangelos Benos and Anne Wetherilt of the Bank’s Payments and Infrastructure Division.
Designated market makers (DMMs) have traditionally been a source of liquidity for exchange-traded securities and financial contracts.  Recent regulatory and technological developments, however, have changed the environment in which DMMs operate, raising questions about their place in the new trading landscape.  This article discusses the role and challenges of DMMs in today’s trading venues.
By Andrew Bailey, Executive Director of the Bank of England and Managing Director of the Financial Services Authority’s Prudential Business Unit, and Sarah Breeden and Gregory Stevens of the Bank’s PRA Transition Unit.
The Prudential Regulation Authority (PRA), as part of the Bank of England, will become the United Kingdom’s prudential regulator for banks, building societies and credit unions (collectively deposit-takers), insurers and major investment firms in 2013.  This is part of a wider reform of the UK regulatory framework, which will also see the creation of a Financial Policy Committee within the Bank, and a new conduct regulator, the Financial Conduct Authority.  This article provides a brief description of the PRA’s role and its intended supervisory approach.  It summarises some of the key themes of the two more detailed documents about the PRA’s intended approach that were published jointly by the Bank and the Financial Services Authority in October 2012.