Bank of England (BoE) Governor Andrew Bailey and British finance minister Rachel Reeves have raised the prospect of the BoE making money from its new system for providing reserves to banks after racking up huge losses from its bond buying program.
In an exchange of letters, Bailey and Reeves said the new, repo-based system was likely to prove less damaging for the public finances, according to Reuters, Reeves wrote: “Dependent on the evolution of demand for reserves and the design of the Bank’s repo facilities, the transition to repo is expected to generate income for the Bank and broader public sector.”
In addition, the Bank of England is expected to seek feedback on gilt market reforms later this year, according to a recent speech by deputy governor Sarah Breeden.
“The [discussion paper] will be exploratory and will aim to gather views from market participants on potential options to help mitigate vulnerabilities, including greater central clearing of gilt repo and minimum haircuts on non-centrally cleared repos,” she said.