I can announce today the conclusion of a Bank of England and HM Treasury five-yearly review of the Bank’s capital framework parameters, as set out in section 2B of the Bank and HM Treasury financial relationship memorandum of understanding.
The review concluded that:
The capital framework has been effective in delivering its intended objectives at inception in 2018: to ensure that the Bank is equipped with capital resources consistent with the monetary and financial stability remits it has been given by Parliament.
The existing parameters of the capital framework remain adequate to support the Bank’s balance sheet.[1]
The existing Bank-HMT financial arrangements, as set out in the MoU, are sufficient to support the bank’s planned transition to a demand-driven operating framework fully backed by repo.[2]
The Bank and HM Treasury will keep these arrangements under review during the Bank’s balance sheet transition to a new steady state in coming years, ensuring close engagement as per the existing governance and information sharing channels set out in the MoU.
[2] Further detail on the transition of the Bank’s operating framework can be accessed through the following attachments:
[HCWS456]