Bank of England opens non-bank repo facility

The Bank of England (BoE) announced it’s opened the Contingent Non-Bank Financial Institution Repo Facility (CNRF) for applications.

The new facility, which will only be activated during episodes of severe gilt market dysfunction, will lend to participating insurance companies, pension schemes and liability driven investment funds to help maintain financial stability.

Vicky Saporta, executive director for Markets at the BoE, said in a statement: “Opening for CNRF applications marks a significant step forward in our efforts to deal with future episodes of gilt market dysfunction. Having the ability to lend to eligible non-bank financial institutions in times of severe market stress means we are better equipped to protect financial stability for the benefit of households and businesses throughout the UK.”

Zoe Alexander, director of Policy and Advocacy at Pensions Lifetime Savings Association, said in a statement: “The PLSA strongly welcomes this facility and has been consulted by the Bank during its development. It will provide greater reassurance to defined benefit pension schemes, and their members, that they will be able to obtain liquidity during periods of market dysfunction.”

David Otudeko, interim director of Regulation at the Association of British Insurers, said in a statement: “The ABI welcomes the Bank of England’s new CNRF. It is a helpful emergency liquidity tool to be used during periods of severe market dysfunction only, that could temporarily increase demand for liquidity.”

Non-bank financial institutions have continued to grow in significance and importance in terms of the impact on UK financial stability. This new tool will support financial stability in times of severe market stress, by providing backstop liquidity to participating insurance companies, pension funds and liability driven investment funds, reducing their need to sell assets.

Source

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