Bank of England announces total reserves

Speaking at a seminar organized by the Loughborough University School of Business and Economics, Bailey stated that the total reserves held by major British banks at the Bank of England before the 2008 financial crisis were only at the level of 10 billion pounds.

Bailey stated, "Today, banks hold a total of 467 billion pounds in reserves, a significant portion of which consists of high-quality liquid assets."

BoE Governor Bailey said, "It would be fair to say that the pre-crisis figure did not sufficiently account for financial stability needs."

"WE ARE INCREASING CAPACITY"

Pointing out that the current amount of reserve requirements also includes reserves created as a product of the policy known as "quantitative easing" (QE), Bailey continued his speech as follows:

"QE is an asset swap; the Central Bank provides cash reserves or money in exchange for purchasing less liquid assets. Thus, we are increasing the liquidity of the financial system and its capacity to support activity in the economy. Therefore, while QE has increased the stock of reserves for monetary policy purposes, it is important to remember that there is another reason for banks to hold reserves, which is financial stability."

In his speech, Bailey noted that British banks have weathered the turmoil of the last four years in a healthy manner, contributing to the preservation of financial stability in the country.

News Source: AA