Update to lending and deposit spread of the Operational Standing Facility – Market Notice 8 December 2025

Market notice

In line with the Bank's transition to a repo-led, demand-driven operational framework for providing reserves, the Bank is today announcing a reduction in the spread to Bank Rate of the Operational Standing Facility (OSF). This Market Notice confirms the new, recalibrated spread of the OSF at Bank Rate +15bps for the lending facility and Bank Rate -15bps for the deposit facility. As with all SMF facilities, the OSFs are 'open for business' and should be used by SMF participants for the purposes of liquidity management.

The Bank of England (the Bank) is today announcing the spread of the on-demand, bilateral Operational Standing Facility (OSF) will be recalibrated to Bank Rate + 15bps for the lending facility and Bank Rate -15bps for the deposit facility, from +/- 25bps previously.

All other OSF operation parameters remain unchanged.

The recalibrated OSF will allow counterparties to respond better to liquidity needs that arise between the Bank’s regular market-wide operations, ensuring short-term market interest rates remain anchored to Bank Rate while still limiting the risk of private market disintermediation. The decrease in the spread over Bank Rate for OSF lending is an important first step in strengthening the provision of reserves through our on-demand facilities.

As part of its transition to a repo-led, demand-driven framework, the Bank has made changes to its regular market-wide operations, including the launch of the STR in 2022 and recalibration of the ILTR this year. The Bank has also indicated^{footnote [1]} that it is reviewing its on-demand bilateral facilities – the OSF and Discount Window Facility (DWF) – as the next step in this balance sheet transition. This recalibration is in line with this review.

The Bank is reviewing the DWF as the second step in strengthening the provision of reserves through our on-demand, bilateral facilities and intends to publish an announcement relating to any changes to this facility in the first part of 2026. In addition, as part of the PRA's review of the prudential liquidity framework in light of lessons learnt from March 2023 and the Bank's transition to a repo-led framework^{footnote [2]}, the PRA will update its proposed approach to usage of the full suite of market-wide and bilateral SMF facilities. All of the Bank’s SMF facilities – including the OSFs and the DWF, as with the Bank’s market-wide facilities – remain ‘open for business’ and should be used by SMF participants for the purposes of liquidity management.  

The Bank confirms recalibration of the OSFs take effect immediately and applies to all new OSF activity. The OSFs remain a same-day settlement operation. Firms should pre-position collateral and contact the Bank at the earliest opportunity to ensure smooth settlement. The Bank is available to facilitate small-scale test trades if participants wish to improve their operational preparedness.

As with all SMF facilities, the Bank will keep the calibration of the OSFs under review and may periodically update the parameters. Decisions regarding changes to the OSFs will be taken to ensure that its terms remain robust to structural changes in market conditions and continue to meet the Bank’s policy objectives.  

Other than as amended by this Market Notice, the Terms and Conditions and Operating Procedures for participation in the Bank’s Sterling Monetary Framework will continue to apply to OSF operations.