The Monetary Policy Committee of the Bank of England decided at its meeting ending on 3 February 2022 to reduce the stock of UK Government bonds (gilts) and sterling non-financial investment-grade corporate bonds held in the Asset Purchase Facility by ceasing to reinvest maturing securities.
On 28 September 2022, in line with the Bank’s financial stability objective, the APF carried out purchases of long-dated gilts to restore orderly market conditions. This was then expanded on 11 October to include index-linked gilts. As noted in the written ministerial statement of 12 October 2022[1] the authorised total size of the APF was increased from £866 billion to £966 billion at the time to allow for a time-limited intervention.
Total gilt purchases under this financial stability operation reached £19.3 billion when the daily auctions ended as planned on 14 October. I have therefore agreed to reduce the authorised maximum size of the APF from £966 billion, as was agreed on 28 September 2022, to £886 billion. This reduction reflects the unused portion of the recent £100 billion financial stability related APF expansion.
The Governor and I will continue to jointly agree the authorised maximum size of monetary policy related asset purchases every six months, as the size of APF holdings reduces, to reflect the size of the portfolio. This month a further reduction in the authorised maximum size of the APF will be agreed in relation to the ongoing unwind of assets acquired for monetary policy purposes.
The risk control framework previously agreed with the Bank will remain in place, and HM Treasury will continue to monitor risks to public funds from the APF through regular risk oversight meetings and enhanced information sharing with the Bank.
There will continue to be an opportunity for HM 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 Bank of England Asset Purchase Facility Fund (BEAPFF), 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.
[HCWS359]