Banks should be prepared to change the way they manage liquidity. On June 11th, Vicky Saporta, a senior official of the Bank of England, stated that banks operating in the UK should be prepared to change their liquidity management methods and make greater use of the Bank of England’s tools as ongoing bond sales and other loan repayments consume liquidity.
Saporta indicated that the Bank of England estimates the financial system could reach its “preferred minimum reserve range” as early as the second quarter of next year.
“Banks must now fully consider the constantly changing liquidity environment and plan accordingly to seek reserves,” Saporta said in a speech at the Central Bank of Finland.
She added, “This means borrowing more funds from the Bank of England on a regular basis, considering their market access, testing the business on a regular basis, and actively considering the level of pre-allocated collateral.”
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