MNI:UK Hammond Authorises Stg25bn Term Funding Scheme Increase

-Increase Increases BOE Asset Purchase Scheme To Stg585 billion

By David Robinson

     LONDON (MNI) - UK Chancellor of the Exchequer Philip Hammond authorised a

stg25 billion increase in the Bank of England's Term Funding Scheme (TFS)

Monday.

     Hammond's move raised the total size of the TFS to stg140 billion. The BOE

initially predicted that the TFS, which was launched in August 2016 and provides

cheap funding to banks, would provide around stg100 billion of lending but this

was raised to stg115bn and has now been increased again.

     Bank Governor Mark Carney noted that TFS drawings had reached stg91 billion

in mid-November and "we now expect the final level of drawings to exceed stg115

billion."

     As a result, he requested that the Treasury, which indemnifies the TFS,

authorise an extra stg25 billion. This takes the total size of the BOE's Asset

Purchase Facility to Stg585 billion.

     The TFS provides four year loans, adding to public sector debt, but when

these are repaid the TFS will improve the debt picture and help Hammond meet one

of fiscal goals.

     Ross Campbell, Director, Public Sector at the Institute of Chartered

Accountants of England and Wales, previously told Market News that because of

the TFS "the Chancellor has a much better chance of achieving his 2020 target of

a falling debt to GDP ratio than might be the case without this effect."

     Hammond will unveil the new Budget arithmetic Wednesday.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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