Bank of England expands access to SMF
07 November 2014 London
Image: Shutterstock
The Bank of England is widening access to its Sterling Monetary Framework (SMF) and will now accept broker-dealers and central counterparties (CCPs).
The change gives some recognition to the importance of broker-dealers and CCPs in providing financial services to the wider economy, and follows the governor’s pledge in June to widen access to bank facilities.
Broker-dealers and CCPs will be exposed to liquidity risks, but the central bank is able to provide central bank money as a ‘back stop’ provider of liquidity, thereby providing liquidity insurance to the whole financial system.
Any broker-dealer that is deemed critical to the stability of the UK financial system will be eligible to participate in the SMF system, as will CCPs that operate in the UK market and are either authorised under European market infrastructure or recognised by the European sales and marketing association.
Under the guidelines, new participants can also be involved with the discount window facility.
The changes are set out in an updated version of the Red Book, which outlines the Bank of England’s operations in the sterling money market.
The change gives some recognition to the importance of broker-dealers and CCPs in providing financial services to the wider economy, and follows the governor’s pledge in June to widen access to bank facilities.
Broker-dealers and CCPs will be exposed to liquidity risks, but the central bank is able to provide central bank money as a ‘back stop’ provider of liquidity, thereby providing liquidity insurance to the whole financial system.
Any broker-dealer that is deemed critical to the stability of the UK financial system will be eligible to participate in the SMF system, as will CCPs that operate in the UK market and are either authorised under European market infrastructure or recognised by the European sales and marketing association.
Under the guidelines, new participants can also be involved with the discount window facility.
The changes are set out in an updated version of the Red Book, which outlines the Bank of England’s operations in the sterling money market.
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