We also expect participants to give us enough information to manage risks effectively. For instance, if a firm is part of a wider legal group structure, we may ask for a guarantee from another firm within that group. Participation is also subject to a range of legal and operational requirements. International Central Securities Depositories Which types of firms can participate in our operations This is necessary to ensure participation in CHAPS and CREST can occur safely. These are normally coupled with access to our Operational Standing Facility (OSF), which is a key tool for managing reserves balances on an intra-day basis. Eligible firms that meet this criterion must hold a reserves account. The only exception is if a firm is a direct settling participant of the sterling high-value payment and securities settlement systems ‘ CHAPS’ or ‘ CREST’. Participating in our operations is generally voluntary, and eligible firms can choose which operations they sign up to. But, only if they individually meet the Prudential Regulation Authority’s (PRA) threshold conditions for authorisation (or a comparable test where firms are not PRA-regulated), and the operational and other requirements set out in our Terms and Conditions and Operating Procedures. If we judge a category of firm to be eligible for access to the Bank’s facilities, then all firms within that category are eligible to apply. Whether they are subject to appropriate regulatory scrutiny.The extent of overnight liquidity risk they run in the course of their business.Their critical importance to the financial system.We assess whether a particular group of firms should be eligible to participate based on a number of key considerations. Our eligibility criteria apply by type of firm. This helps ensure that firms adopt a prudent approach and avoid undue concentration, by balancing use of our liquidity insurance facilities with their use of other funding sources in the wider market.Ĭompared with many central banks, access to our operations is open to a relatively wide set of eligible financial firms. Pricing is carefully set to ensure that while our facilities are not a ‘last resort,’ they are also not likely to be cheaper than private markets in normal times. Third, by pricing our facilities appropriately.That collateral is subject to prudent haircuts. When we lend through our facilities, whether in the form of cash (eg in the Indexed Long-Term Repo (ILTR)), or highly liquid securities (eg in the Discount Window Facility (DWF)), we manage our counterparty risk to the borrower by securing our lending against collateral posted by the borrowing firm. Second, by applying collateral requirements.This oversight provides an important assurance that we are lending only to firms that meet minimum prudential standards. To be eligible to participate in the Bank’s operations, firms must be subject to robust supervisory oversight by the Prudential Regulation Authority (PRA) or a comparable prudential regulator. First, by applying appropriate eligibility criteria.To protect public money, we manage that risk in three ways: When we lend to firms we naturally incur risk. We conduct regular testing across a range of different market activities, on an ongoing basis. As part of our role in markets, we undertake our own work to ensure that we are operationally ready and resilient. For example, the PRA issues guidance and rules for the firms it regulates concerning this. Operational readiness and resilience is an area of importance for us. Our ‘open for business’ approach means that where eligible firms meet our supervisory threshold conditions and have appropriate collateral they can sign up to and use our facilities. It also covers how firms can apply for access and make use of them. This section of the Guide provides more detail on the market-wide operations and facilities we use to achieve our monetary policy and financial stability objectives. Our tools – How we use our balance sheet to achieve them Overview News and publications Open News and publications sub menu.Option-implied probability density functions Gross Domestic Product Real-Time Database The PRA’s statutory powers and enforcement Money Markets Committee and UK Money Markets Code Greening our Corporate Bond Purchase Scheme (CBPS) Operational resilience of the financial sector Wholesale cash distribution in the futureįinancial market infrastructure supervision
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