The Bank of England (BoE) has published its latest Market Notice which sets out how it intends to initially operate the asset purchase facility (the Facility) agreed with the Government in an exchange of letters between the Chancellor and the Governor of the BoE dated 29 January 2009.  

Under the Facility the BoE has been authorised to purchase up to £50bn of high quality private sector assets. The following sterling assets are initially eligible for purchase: commercial paper, corporate bonds, paper issued under the Credit Guarantee Scheme (CGS), syndicated loans and asset-backed securities created in viable securitisation structures.  

The Market Notice sets out:

  • Details of a commercial paper facility to enable the purchase of investment grade sterling commercial paper issued by UK corporates, both at issuance and in the secondary market, subject to a minimum spread. The BoE expects that this facility will be operational on 13 February 2009.
  • An outline proposal for a corporate bond secondary market scheme under which the BoE would propose to provide a back-stop offer to purchase modest amounts of a wide range of investment-grade sterling UK corporate bonds with the aim of improving secondary market liquidity, initially by facilitating market-making by banks and dealers. The BoE is consulting on this proposed facility, with a view to moving to launch as soon as possible.
  • In addition, the BoE is seeking feedback on an outline proposal for a planned facility for paper issued under the CGS facility for banks. Such a scheme could involve the BoE standing ready to transact in banks’ CGS public bonds with intermediaries that commit to provide regular prices to counterparties as market makers in such securities, underpinning market-making and so secondary market activity.
  • More generally, the BoE plans to engage in a broader dialogue on ways in which the Facility might be used to purchase syndicated loans and asset-backed securities with viable securitisation structures, with a view to improving liquidity in those markets.

The BoE welcomes comments on the Market Notice.

View CEBS guidelines on passport notifications, 6 February 2009