Cash ratio deposits (CRDs) are non-interest bearing assets deposited with the Bank of England by banks and building societies. They are used by the Bank to finance its policy functions, in particular its efforts to secure price stability and the stability of the financial system in general, from which these institutions are key beneficiaries.
The CRD scheme was extended to include building societies, and was placed on a statutory basis, when the Bank of England Act became law in 1998. The scheme has been reviewed every five years since. The last review in 2013 resulted in the CRD ratio being increased from 0.11 % to 0.18%, following a public consultation. As part of the 2013 review, the Government committed to reviewing the scheme again within five years. The Treasury, working closely with the Bank, will now begin that review.
The review will include an assessment of the detailed arrangements of the scheme as well as the continuing suitability of the scheme itself compared to alternative sources of funding. It will also address the impact of the scheme on the eligible institutions. The broad conclusions of the review will be the subject of a public consultation.