This note describes new arrangements for the prudential supervision of the discount market. A fuller description of the arrangements was issued by the Bank on 3 June.
For many years, the discount houses have observed some simple multipliers relating their trading activities to their capital resources. The multipliers have served two purposes: they have defined the basis of competition among the discount houses, and they have provided the focus for prudential supervision of the houses by the Bank. The principal multiplier provided a guideline of 30 times its 'resources' as the maximum size of a house's total book. A subsidiary multiplier of 8 times resources was applied to the house's bond book.
Prudential arrangements for the discount market