News Release
Reforms to the Bank of England's Operations in the Sterling
Money Markets: Target Launch Date for the New Framework
29 March 2006
The Bank is today announcing that, subject to conducting a successful dress rehearsal, it is aiming to introduce the new reserve-averaging scheme and standing facilities on 18 May 2006. This reflects continued good progress in the Bank’s own preparations and those of the prospective reserve scheme members and counterparties.
As announced in December, the Bank will finally decide the launch date following a rehearsal involving external participants in April. The contingency launch date is 15 June.
Notes to Editors
1. The overall reformed framework for the Bank’s operations in the sterling money markets was set out in a paper ‘Reform of the Bank of England’s Operations in the Sterling Money Markets' published on 4 April 2005.
The objectives of the reforms are:
• Overnight market interest rates to be in line with the
MPC’s repo rate, so that there is a flat money market
yield curve, consistent with the official policy rate, out to
the next MPC decision date, with very limited day-to-day or
intra-day volatility in market interest rates at maturities
out to that horizon.
• An efficient, safe and flexible framework for banking
system liquidity management – both in competitive money
markets and, where appropriate, using central bank money –
in routine and stressed or otherwise extraordinary conditions.
• A simple, straightforward and transparent operational
framework.
• Competitive and fair sterling money markets.
In pursuit of these objectives, the Bank is introducing a new
framework based on a system of voluntary remunerated reserves
with a period-average maintenance requirement. In addition,
standing borrowing and deposit facilities will be available
on demand to a wide range of banks and building societies. The
Bank’s scheduled short term open market operations will
move to weekly operations of one-week maturity, with a routine
overnight fine-tuning operation on the final day of the maintenance
period.
2. In December, the Bank announced that it expected to introduce
the new framework in May or June 2006 and that it would announce
the planned date in the spring; it also set out the key milestones
leading up to launch.
A contingency launch date has been set for Thursday 15 June
should any issues arise that prevent launch on 18 May. As set
out in the December timetable paper, the Bank will confirm these
dates following the dress rehearsal on 5 and 8 April.
3. The Bank has published today a Market Notice to participants
in the new framework setting out the operational arrangements
for introducing it.
Key Resources
 |
Market Notice to Participants |
|
Reform
of the Bank of England’s Operations in the Sterling
Money Markets Download PDF (284k) 4 April 2005 |
|
Key Milestones Leading up to Launch Download PDF (33k) |
