The Bank of England launches new term repo facility
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The Bank of England launches new term repo facility 25 March 2020London Reporter: Natalie Turner
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The Bank of England (BoE) has launched a Contingent Term Repo Facility (CTRF) as a temporary enhancement to its sterling liquidity insurance facilities.
The new liquidity insurance tool aims to 鈥渁lleviate frictions鈥� in money markets in recent weeks, both globally and domestically, as a result of the economic shock caused by the outbreak of COVID-19.
The CTRF allows market participants to borrow central bank reserves in exchange for other collateral.
The BoE says this is a reliable way that banks can gain the necessary liquidity to support overall financial stability as they attempt to balance their books over Q2 quarter-end amid the on-going market distress.
The new facility will remain in place for three months, starting on 24 March, and will bolster the bank鈥檚 existing sterling market operations. These include the Indexed Long-Term Repo and Discount Window Facilities.
The BoE is also able to lend in all major currencies through its participation in the central bank
The central bank says: 鈥淭his will also allow participants to use the CTRF as a way to bridge beyond the point at which drawings can be made from the Term Funding Scheme with additional incentives for SMEs 鈥� helping to support lending to the real economy as quickly as possible.鈥�
The CTRF鈥檚 launch comes days after the gave its strongest indicator yet that it would not follow some of its European counterparts in banning short selling.
The market regulator appeared to rule out a lockdown on short selling which it described as a 鈥渃ritical underpinning of liquidity provisions鈥�.
It also follows the BoE's decision to slash for a second time in recent weeks to by 15bps to 0.1 percent.
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