MNI BRIEF: BOE Markets Head Sees Wider Collateral, More Repos

MNI (LONDON) - The Bank of England's shift from excess to demand-led reserves is on track and there will be greater use of repos and non-gilt collateral, Vicky Saporta, the new Executive Director Markets said in her maiden speech Monday.

As the BOE continues with gilt sales from its asset pile built up during quantitative easing, it is aiming to ensure banks have ample reserves through the use of its repo facilities. Saporta told an AFME event in London that they welcomed the increased use of the Short Term Repo (STR) facility and that it would complemented by enhancing usage of the  Indexed Long-Term Repo facility (ILTR), which supplies reserves against a wide range of collateral, entailing that the BOE will hold a greater share of non-gilt assets on its balance sheet.

"While we are still well above estimates of where the preferred minimum range for reserves (PMRR) demand may be, there is uncertainty about the accuracy of these estimates," Saporta said. The BOE's survey estimated the PMRR at current survey-based PMRR at GBP345-490 billion. (see MNI INTERVIEW: BOE Could Spark QT Woes Before Banks Expect)