Review of the Cash Ratio Deposit scheme: consultation on proposed changes
The Cash Ratio Deposit (CRD) scheme funds the Bank of England’s monetary policy and financial stability functions. Under the scheme, banks and building societies with eligible liabilities of more than £600 million are required to place a proportion of their deposit base with the Bank on a non-interest bearing basis. The Bank then invests these funds in interest bearing assets (i.e. gilts) and the income generated is used to meet the costs of its monetary policy and financial stability functions.
The CRD scheme was placed on a statutory footing by the Bank of England Act 1998. At the last review in 2018 the government committed to review the scheme within five years. The Economic Secretary to the Treasury laid a written ministerial statement on 20 July 2021 announcing the start of this review.
The government is now consulting on the way banks and building societies contribute to funding the Bank of England’s monetary policy and financial stability functions, and proposals for an alternative funding arrangement. The consultation document can be found on Review of the Cash Ratio Deposit scheme: consultation on proposed changes - GOV.UK (www.gov.uk).
Responses are invited by 5 November 2021 and should be sent to CRD.Review@HMTreasury.gov.uk. The government will publish a formal response following the consultation.