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Contingent Liability Notification

Volume 714: debated on Thursday 12 May 2022

The Monetary Policy Committee (MPC) of the Bank of England (“the Bank”) decided at its meeting ending on 3 February 2022 to reduce the stocks of UK Government bonds and sterling non-financial investment-grade corporate bonds held in the asset purchase facility (APF) by ceasing to reinvest maturing securities. The MPC also agreed that the Bank of England should initiate a programme of corporate bond sales to be completed no earlier than towards the end of 2023 that should unwind fully the stock of corporate bond purchases.

In response to this decision, the Governor and I jointly agreed that, as the size of APF holdings reduces, the authorised maximum size for asset purchases should be adjusted to reflect the size of the portfolio every six months.

Since 3 February 2022, the total stock of purchased assets of the APF has fallen from £895 billion to £866.6 billion. Following this, and in line with the approach agreed with the Governor in February 2022, the authorised maximum total size of asset purchases within the APF has been reduced from £895 billion to £866.6 billion.

The risk control framework previously agreed with the Bank will remain in place, and HM Treasury will continue to monitor risks to public funds from the APF through regular risk oversight meetings and enhanced information sharing with the Bank.

There will continue to be an opportunity for HM 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, the APF and its directors 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.