Minutes of Money Market Committee meeting – December 2022

Minutes

Item 1 – Welcome

The Chair thanked members for attending and confirmed that the Minutes of the November 2022 meeting had been published on the Bank’s website.^{footnote [1]}

The Chair welcomed new members and alternates. The Chair also welcomed those who were attending as part of the Bank’s Meeting Varied People (MVP) initiative.

Item 2 – CREST outage and the MMC’s engagement with broader market contingencies

The Chair introduced the topic, noting that there would be a chance to take stock of the Committee’s broader involvement in market contingency planning - specifically via the Sector Response Framework (SRF) - as part of the review of Terms of Reference scheduled for H1 2023. One option would be that the Committee could nominate a representative who would act as liaison with the SRF during market contingencies, both to input relevant sector views and to disseminate information back to members.

Attendees from Euroclear UK & Ireland (EUI) presented on the June 2022 Non-Standard CREST Closure (NSCC) and steps that were being taken to rectify causes and learn from the experience.

The NSCC procedure was invoked on 17 June due to the suspension of CREST settlement systems following an outage caused by a software issue. A software workaround was deployed on Saturday 18 June which allowed the remainder of the prior day’s processing to complete prior to the next business day. The presentation covered the cause of this incident, its business impacts on the day and next steps.

The Committee discussed potential approaches to managing the impact of such incidents, including matching trades more promptly during business days, and reducing the use of self-collateralising repo.

Members also discussed settlement window extensions. Some members commented that longer (and earlier announced) extensions would be beneficial when the market was experiencing difficulties. But other members noted the risks of announcing extensions too early and noted the costs of extensions. For instance, there were staffing impacts, and any extension had to be seen in the context of the banking system’s batch overnight processing infrastructure that required a fixed number of closed hours.

Item 3 – Discussion on market conditions and looking ahead to year-end

The Bank gave a short update on the unwind of its financial stability gilt purchases. Thereafter a broad update on developments and conditions in global markets was presented by a member of the Committee, focusing in particular on upcoming government bond supply and broader cross-market trends going into year-end.

The Committee discussed a range of points including the likely trajectory for LDI leverage, where there was general agreement that leverage was likely to remain lower and cash buffers more elevated than recent historic levels for some time.

Somewhat linked to that point, the Committee also discussed short-end collateral scarcity, and possible ways in which that might evolve over the coming year.

Committee members also discussed the upcoming roll-off of the Bank’s Term Funding Scheme with addition incentives for SME lending. Most members were not concerned about the market impact, though some thought that the roll-off would be more impactful for smaller institutions with less well-developed access to funding.

Item 4 – Diversity & Inclusion (D&I)

An update was given on the steps the Bank was taking to enhance D&I among its market intelligence contacts, focusing on the Meeting Varied People (MVP) initiative.

The Committee’s ongoing involvement in the MVP initiative - whereby members, on rotation, bring along junior, diverse colleagues to meetings as observers - was welcomed.

Item 5 – AOB

The Chair thanked members for their time and welcomed any suggestions for future agenda items to be sent to the Secretariat in due course.

Committee attendees

Gordon Lowson – Abrdn
James Winterton – Association of Corporate Treasurers
Michael Manna – Barclays Bank UK
Emma Cooper – BlackRock
Ina Budh-Raja – BNY Mellon
Romain Dumas – Credit Suisse
Marije Verhelst – Euroclear
Ian Dowglass - Euroclear (presenter)
Inna Shaykevich – Goldman Sachs
Arthur Chauchat - Goldman Sachs (presenter)
Urvashi Chahal - Goldman Sachs (presenter)
Mike Brown – J.P. Morgan (alternate)
Tony Baldwin – LCH
Ross McDonald – Legal & General Investment Management (alternate)
Peter Left – Lloyds
Nina Moylett – M&G
Simon Conner M&G (MVP invitee)
Jordan Broad – NatWest (alternate)
Avi Tillu – PIMCO
Alan Williams – Santander UK
Romain Sinclair – Société Générale
Lynda Heywood – Tesco PLC
Ryan Jones - Tesco PLC (MVP invitee)
John Argent – Tradition
Nancie Muzzlewhite - Tradition (MVP invitee)
Jo Whelan – DMO (Observer)
Liam Browne – FCA (Observer)

Bank of England

Rhys Phillips (Chair)
Jon Pyzer
Tom Horn
David Glanville
Tom Archer
Grace Greer
Sumita Ghosh (presenter)
Sandeep Tayal (presenter)

Apologies

Jessica Pulay – DMO (Observer)
Alan Barnes – FCA (Observer)
Victoria Worsfold – Guildford Borough Council
James Murphy – HSBC
Chris Brown – Insight Investment
Olivia Maguire – J.P. Morgan Asset Management
Ben Challice – J.P. Morgan
John Wherton – Legal & General Investment Management
Rachel Lane – NatWest
Nic Erevik – Newcastle Building Society
Chirag Patel – Rabobank