This is the first three-yearly report - see, and replaces the review that was scheduled to be published in 2020 but that was deferred due to the Covid-19 (Covid) crisis. Except where otherwise stated, it, therefore, provides a factual update on the Bank’s official market operations from 1 March 2019 to 28 February 2021 (the end of the Bank’s financial year). However, it also details some of the important policy developments and debates over the past three years, and in particular, reflects on the Bank’s response to Covid.

How well did the Bank perform?

Throughout this period, the Bank has taken stock of its actions, identifying where the framework has worked well, and where future reflection might be needed. The report concludes that:

Overall, the Bank’s response is judged to have been effective in channelling liquidity to the banking system and in calming significant market dysfunction. Existing and new tools allowed the Bank to act at scale, working quickly and effectively, and in close coordination with other central banks.

Weekly Indexed Long-Term Repo (ILTR) operations were heavily used by participants as the crisis unfolded. To buttress that flow of liquidity the Contingent Term Repo Facility (CTRF) was activated in March 2020. Operations backed by the standing dollar swap lines were offered at longer maturity, higher frequency and tighter pricing, supporting financial stability and offsetting the rapid deterioration in dollar funding conditions. In addition, the Liquidity Facility in Euros (LiFE) continued to offer to lend euros on a weekly basis.

In response to Monetary Policy Committee, policy decisions asset purchase operations were dramatically scaled up, with the Bank’s holdings of gilts increasing by 91% since the beginning of March 2020 and holdings of corporate bonds doubling

In response to MPC policy decisions, asset purchase operations were dramatically scaled up, with the Bank’s holdings of gilts increasing by 91% since the beginning of March 2020 and holdings of corporate bonds doubling

The report also describes how the ‘dash for cash’ caused by the Covid crisis exposed a number of underlying vulnerabilities in the global financial system, particularly relating to the role of non-bank financial intermediaries (NBFIs).

Climate change importance recognized

The challenge posed by climate change led to a change in the remit of the MPC in 2021. In response, the Bank issued a Consultation Paper in May 2021 on ‘Options for greening the Bank of England’s Corporate Bond Purchase Scheme’, and aims to implement a set of changes in 2021 Q4.

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CTMfile take: The BofE has performed impressively over the last three years including the COVID-19 pandemic. We look forward to their ‘Options for greening paper’ later this year.