BOE Reveals Design of Emergency Lending Facility for Non-Banks
- Facility will offer liquidity during bouts of market stress
- The tool will be open to pension funds, insurers, LDI funds
The central bank said applications to join the facility are expected to open in the final quarter of 2024.
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The Bank of England revealed details of a new facility designed to avoid UK bond market blow-ups like the one two years ago by lending directly to asset managers.
During times of “severe” market dysfunction, the BOE will provide non-bank financial institutions (NBFIs) such as pension funds cash in return for gilts pledged as collateral, the central bank said in a note Wednesday. Lending directly to firms other than banks is a radical proposal as it greatly expands the central bank’s purview, which traditionally has relied on commercial banks to manage the liquidity needs of financial markets.