British banks draw down liquidity
UK banks have drawn down £185 billion of treasury bills under the Bank of England’s Special Liquidity Scheme.
The banks could have swapped mortgage-backed securities for bonds up to a total of £250 billion under the scheme.
Since the scheme was launched in April last year, 32 UK banks and building societies have taken part.
The total value of bank issued securities held by the Bank of England as collateral under the scheme amounts to £287 billon.
The Bank of England has valued these securities, at the end of January, at approximately £242 billon, a discount to par of about 16 per cent.
Most of the collateral is residential mortgage-backed securities or residential mortgage covered bonds.
The Bank of England can call for further margins should the value of the securities fall below the Treasury’s bond valuations, and will regularly value the securities using independent market prices.
The banks and building societies are being charged a fee for the bonds based on the spread between the three-month London Interbank Offered Rate and the three-month General Collateral gilt repo rate.
The average spread during the drawdown period of the scheme was 115 basis points.
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
