BOE Wants Banks to Use Long-Term Repos Amid Liquidity Drain

The Bank of England is urging market participants to prepare for a new cash management regime as excess liquidity is drained from the financial system.

Vicky Saporta, the BOE’s executive director for markets, said the central bank wants to move from buying assets in exchange for cash-like reserves to a system of lending cash against those assets. The move aims to protect its balance sheet from interest-rate risk.

The market has been shifting to repo operations as the BOE reduces its balance sheet through a mixture of bond sales and not reinvesting maturing gilts in its portfolio. But the ...