Contingent Liability

Rishi Sunak Excerpts

Monday 22nd June 2020 Written Statements

[The Chancellor of the Exchequer (Rishi Sunak)]

The Monetary Policy Committee (MPC) of the Bank of England decided at its meeting ending on 17 June to ask for an expansion in the maximum limit of purchases that may be undertaken by the Asset Purchase Facility (APF). This will encompass up to £100 billion of further purchases of gilts to support the economy.

In light of the latest economic conditions, the MPC judged further asset purchases financed by the issuance of central bank reserves should be undertaken to enable the MPC to meet its statutory objectives, and thereby support the economy. I have therefore authorised an increase in the total size of the APF of £100 billion. This will bring the maximum total size of the APF from £645 to £745 billion.

In line with the requirements in the MPC remit, the amendments to the APF that could affect the allocation of credit and pose risks to the Exchequer have been discussed with Treasury officials. The risk control framework previously agreed with the Treasury will remain in place, and HM Treasury will keep monitoring risks to public funds from the Facility through regular risk oversight meetings and enhanced information sharing with the Bank.

There will continue to be an opportunity for the Treasury to provide views to the MPC on the design of the schemes within the APF, as they affect the Government’s broader economic objectives and may pose risks to the Exchequer.

The Government will continue to indemnify the Bank and the APF from any losses arising out of, or in connection with, the Facility. If the liability is called, provision for any payment will be sought through the normal supply procedure.

A full departmental Minute has been laid in the House of Commons providing more detail on this contingent liability.

[HCWS303]