Notification of Contingent Liability

HM Treasury written statement – made on 20th November 2017.

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Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

The Governor of the Bank of England requested on 20 November 2017 to raise the limit on purchases that may be undertaken by the Asset Purchase Facility (APF). This will ensure that the Term Funding Scheme (TFS) can continue to lend central bank reserves to banks and building societies at rates close to Bank Rate during a defined drawdown period, which will close at the end of February 2018.

When the Monetary Policy Committee (MPC) first introduced the scheme in August 2016, I agreed with the Governor of the Bank of England that total TFS drawings would be determined by usage of the scheme. I have therefore authorised an increase in the total size of the APF of £25 billion to £585 billion, in order to accommodate expected usage of the TFS by the end of the drawdown period.

In line with the requirements in the MPC remit, the amendments to the APF that could affect the allocation of credit and pose risks to the Exchequer have been discussed with Treasury officials. The risk control framework previously agreed with the Treasury will remain in place.

The Government will continue to indemnify the Bank and the APF from any losses arising out of, or in connection with, the Facility. If the liability is called, provision for any payment will be sought through the normal Supply procedure.

A full departmental Minute is laid in the House of Commons providing more detail on this contingent liability.

This statement has also been made in the House of Lords: HLWS260