LONDON (MNI) – The size of the Bank of England’s second wide
collateral auction will again be for the minimum Stg5 billion of 6-month
money, the central bank announced Tuesday.
The ECTR, designed to provide banks with liquidity in times of
market-wide stress, was activated on June 15, ahead of the Greek
elections on June 17, at a time when fears were high that the euro area
crisis could intensify.
With the ECTRs running for the lowest possible amount of stg5
billion, this highlights the fact that downside risks have not
materialized.
The ECTR auction will be held Wednesday. The minimum bid rate in
the ECTR auctions is for a spread to Bank Rate of 25 basis points and in
the first auction the clearing spread came in at the minimum level of
25bps.
The ECTR is part of the BOE’s liquidity insurance operations, which
aim to ensure the banks have the liqudity they need.
It is part of an interlocking series of BOE-led policy measures
that have been introduced to support the banking channel. The BOE
Financial Policy Committee has advocated allowing banks to run down
liquidity buffers in time of stress in order to support lending.
The ECTR ensures banks provides added reassurance to banks who
might otherwise be leery of running down these buffers.
-London newsroom: 00 44 20 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$$BE$]
