Evaluation of the Bank of England’s approach to providing sterling liquidity

In December 2016, the Bank of England’s Court of Directors commissioned its Independent Evaluation Office (IEO) to conduct a broad-based evaluation of the effectiveness of the Bank’s approach to providing sterling liquidity insurance through its published market facilities (known as the Sterling Monetary Framework or ‘SMF’).
Published on 18 January 2018


The Bank of England’s sterling liquidity facilities are at the heart of its mission — for example, the historical record suggests that the Bank has been providing sterling liquidity to the market for financial stability purposes since at least 1847, and probably longer. In recent years, and in part following a review commissioned by the Court of Directors (the Bank’s Board) in 2012, these liquidity facilities have been subject to a series of reforms. More generally, the wider Bank has sought ways to work more effectively together, in line with its ‘One Bank’ strategy.

Given the importance of the facilities to the Bank’s work, Court commissioned its Independent Evaluation Office to assess whether the various reforms in recent years were on track to achieve their aims.


The evaluation found positive evidence of progress across numerous aspects of sterling liquidity provision. Substantial progress has been made in opening up access to the Bank’s facilities. The Bank’s facilities have become cheaper and more flexible. In the main, firms have been receptive to the reforms, with the Bank’s facilities at least partly integrated into firms’ own liquidity planning. And the institution has made tangible progress of working together well as ‘One Bank’. This is evidenced by, among other things, the comprehensive package of planning for potential liquidity stress around the EU referendum, where the Bank’s approach helped firms plan with confidence. Together with supportive communications immediately after the referendum, this may have tempered the likelihood of a liquidity stress materialising.


The evaluation has uncovered opportunities where the Bank could refine and update its approach. The IEO’s recommendations fall into three main themes: future-proofing the facilities for stress situations; operating the SMF as ‘One Bank’; and communicating the Bank’s risk management approach more effectively.

Follow up

In July 2021, the IEO reported back to Court on the implementation of its evaluation on the Bank’s approach to providing sterling liquidity. It noted that all actions had been completed effectively and that cross-bank working seemed to have improved. The pandemic had resulted in a live testing of the Bank’s liquidity facilities, which had performed very well.

Evaluation of the Bank of England's approach to providing sterling liquidity

The Bank of England’s response to the Independent Evaluation Office’s evaluation of its approach to providing sterling liquidity