BofE becomes commercial bank with £50 bn to invest

Large companies will able to raise cash in return for putting up assets as security.

Bank of England asset purchase facility

As a further step to increase the availability of corporate credit, by reducing the illiquidity of the underlying instruments, the Bank of England will set up an asset purchase programme implemented through a specially created fund. The Bank will be authorised by the Treasury to purchase high quality private sector assets, including paper issued under the CGS, corporate bonds, commercial paper, syndicated loans and a limited range of asset backed securities created in viable securitisation structures. The Treasury will authorise initial purchases of up to £50 billion, financed by the issue of Treasury bills. Given the scale of the programme, the Bank will be indemnified by the Treasury. This programme will come into effect from 2 February. The programme also provides a framework for the Monetary Policy Committee of the Bank of England to use asset purchases for monetary policy purposes should the MPC conclude that this would be a useful additional tool for meeting the inflation target. In such circumstances, the scale of the scheme could be expanded, a further announcement would be made.

Further details of the arrangements for the Asset Purchase Facility will be set out in an exchange of letters between the Chancellor and Governor before the end of January.