Bank of England Levy

Overview

On 1 March 2024, the Bank of England Levy replaced the Cash Ratio Deposit scheme as a means of funding the costs of the Bank’s monetary policy and financial stability operations.

2026/27: Bank of England (BoE) Fees and Levies

Under the Bank of England Act 1998, the Bank’s Court is responsible for setting the Bank’s strategy and approving its medium-term spending plans within a financial framework.

Almost all (c.97%) of the Bank’s operational costs are recovered through levies and fees. These include the BoE Levy, PRA Levy, FMI Levy and Other (e.g., management fees for Banknotes and the RTGS tariff). The remaining 3% is funded through customer banking charges. In this way, the costs of running the Bank are allocated to different groups of levy/fee payers in proportion to the costs we incur in fulfilling our various statutory objectives. 

The Bank’s costs are subject to tight control and are budgeted within constraints set by Court. Overall, the Bank’s operating budget, and the core levies financing it, are constrained to increase by no more than CPI in 2026/27. The Bank’s operating costs and the associated core levies which pay for it are set to rise by 3% in 2026/27 compared with 2025/26. Within this 3% constraint, individual levies will move up or down relative to each other as the Bank balances strategic operational investment priorities and the costs of running the Bank’s day-to-day operations. 

Cost of Transition: Adjustment to the Bank of England Levy related to the transition away from the legacy CRD funding model

In addition to funding part of the Bank’s operational costs, the Bank of England Levy contains an adjustment reflecting the transition away from the old Cash Ratio Deposit (CRD) scheme, as described in the 2024 BoE Levy Framework Document.

Under the old CRD scheme, financial institutions were required to hold non-interest-bearing deposits at the Bank of England. These deposits were reinvested in gilts, and the income from the gilts was used to fund the Bank’s policy functions. Now that the Bank is instead more stably and directly funded via the levies, there is no need for such non-interest bearing deposits and they were converted into central bank reserves, remunerated at Bank Rate, in March 2024. The corresponding legacy CRD gilt portfolio was transferred to the Banking Department balance sheet at the same time.

At that time, a transitional adjustment mechanism was agreed to ensure that the Bank’s funding was no longer affected by year-to-year movements in market interest rates. Specifically, when Bank Rate exceeds the investment return on the corresponding legacy CRD gilt portfolio, the financial system is required to return the ‘excess’ interest the Bank pays out on remunerated reserves to the Bank via a “Cost of Transition” adjustment to supplement the Bank of England Levy. Conversely, when Bank Rate is below the investment return on the legacy CRD gilt portfolio, the Bank would use the return it makes on the gilts in excess of the interest it pays out on the corresponding remunerated reserves to reduce the Bank of England Levy. This transitional arrangement has no impact on, and is unrelated to, the Bank’s operating costs. Its purpose is solely to ensure that movements in market interest rates do not affect the Bank’s funding or P&L.

Because Bank Rate, and market-derived expectations of it, have risen, the remuneration paid out by the Bank on the reserves associated with the old CRD scheme is forecast to exceed the income generated by the Bank from the corresponding legacy CRD gilt portfolio. To offset this, the Cost of Transition to the Bank of England Levy in 2026/27 is £307m related to expected interest differentials over the course of 2026/27. There is a prior year adjustment of £40m of which £36m relates to the actual Bank Rate differential over 2025/26 relative to the forward OIS curve that was used to project it, and £4m related to under recovery of actual Operational Policy Costs in 2025/26.

The Bank of England Levy is set at £700m for 2026/27, and reflects the transition away from the legacy CRD scheme.

The Cost of Transition for 2026/27 represents the excess interest paid by the Bank to Industry on remunerated reserves created through the gross Cost of Transition to the Bank of England Levy (£874m), less income earned by the Bank on the legacy gilt portfolio (£258m) and the Cost of Transition which was collected in 2025/26 (£273m). 

The resulting £343m is therefore the net amount the Bank is recovering from Industry through the Bank of England Levy, separate from £357m of Operational Policy Costs.

 
The full set of levies for 2026/27, along with a comparison with those of 2025/26 is shown below.

¹ not meaningful in percentage terms.

Bank of England Levy Notification Document

Note: Total Eligible Liabilities (TEL) value for 2026/27 is: £3,417,960m

Next steps

Levy Payers will receive an invoice outlining their contribution to the Levy for the 2026/27 Levy Year. Payment of the Bank of England Levy must be made within 30 days of invoice receipt. 

Bank of England Levy Framework Document

The Bank of England Levy Framework Document outlines the Bank’s approach to levying the costs of its policy functions in pursuit of its Financial Stability and Monetary Policy objectives. 

The Levy will be applied on a proportional basis, which means that the Bank will allocate the policy costs to be recovered by the Levy in proportion to an eligible institution’s liability base. This will be a continuation of how the Cash Ratio Deposit scheme operated. The policy rationale for using the eligible liability base is the link between the size of a financial institution’s liabilities and its potential impact on the Bank’s financial stability and monetary policy functions.

• Bank of England Levy Framework document

The Bank issued a Policy Statement on the 25 January 2024 confirming the responses received to its Consultation Paper on the Bank of England Levy Framework Document.

Our Statistical Reporting page provides information and guidance for firms on reporting their eligible liabilities.

Any queries on the Bank of England Levy should be sent to BoELevy@bankofengland.co.uk.

Terms and conditions

Cash Ratio Deposit (CRD) scheme

The CRD scheme funded the Bank of England’s monetary policy and financial stability functions between 1998 and 2024. 

Under the scheme, banks and building societies with eligible liabilities greater than £600 million were required to place a proportion of their deposit base with the Bank on a non-interest bearing basis. The Bank then invested these funds in interest bearing assets (mainly gilts) and the income generated was used to fund the Bank’s monetary policy and financial stability functions. Details on the proposals and consultation process for moving to the Bank of England Levy can be found in paragraph 1.2 in the Bank of England Levy Framework Document.

<sup>1. The net interest cost of retaining the legacy Cash Ratio Deposit gilt portfolio, as outlined in paragraph 1.13 of the Bank of England Levy Framework Document.
2. Consultation Paper, Bank of England Levy Framework Document, 8 November 2023.</sup>