By Nick McLaren and Tom Smith of the Bank’s Macro Financial Analysis Division.
In November 2012, a process for regular cash transfers between the Bank of England’s Asset Purchase Facility Fund Limited (APF) and Her Majesty’s Treasury (HMT) was established. The size and timing of these transfers depends on a number of uncertain factors, including the future path of Bank Rate, and the price at which the assets held by the APF are ultimately sold. This article uses a spreadsheet-based framework, to show how the size and timing of the transfers varies depending on the assumptions made about these uncertain factors. While the initial transfers are from the APF to HMT, it is likely they will be offset by payments in the opposite direction in the future. The ultimate net amount that will be transferred is uncertain, and a wide range of outcomes is possible.
This article was previously accompanied by an interactive spreadsheet, designed to show how the broad profile of the cash transfers is affected by a small number of key variables over the medium term, under some simplifying assumptions. Due to changes to the Asset Purchase Facility since the publication of this article, this spreadsheet has become outdated and is therefore no longer made available to download.