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The Monetary Policy Committee (MPC) of the Bank of England decided at its meeting ending on 19 March to ask for an expansion in the maximum limit of purchases that may be undertaken by the Asset Purchase Facility (APF). This will encompass up to £200 billion of further purchases of gilts and corporate bonds to support the economy through the disruption caused by Covid-19.
In light of the evidence on the impact of Covid-19 on the global and domestic economy, and conditions in the UK and international government bond markets, the MPC judged further asset purchases financed by the issuance of central bank reserves should be undertaken to enable the MPC to meet its statutory objectives. The MPC expects that purchases of corporate bonds will improve the availability of credit to UK companies and that further purchases of gilts will reduce borrowing costs, raise asset prices, affect expectations and confidence, and thereby support the economy. I have therefore authorised an increase in the total size of the APF of £200 billion. This will bring the maximum total size of the APF from £445 to £645 billion.
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, and HM Treasury will keep monitoring risks to public funds from the Facility through regular risk oversight meetings and enhanced information sharing with the Bank.
There will continue to be an opportunity for the Treasury to provide views to the MPC on the design of the schemes within the APF, as they affect the Government’s broader economic objectives and may pose risks to the Exchequer.
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 has been laid in the House of Commons providing more detail on this contingent liability.