Bank of England Governor Andrew Bailey confirmed the profit made from the insitution’s emergency bond purchases last year will benefit the UK Treasury.
(Bloomberg) — Bank of England Governor Andrew Bailey confirmed the profit made from the insitution’s emergency bond purchases last year will benefit the UK Treasury.
The buying was triggered to stabilize the gilt market after the crisis spurred by then-Prime Minister Liz Truss’s budget program in September. The BOE said last week the bonds have all been sold, booking a profit of about £3.5 billion.
“The relevant cash flows associated with the portfolio, including profits realised on the sales, have been incorporated into the usual quarterly cash transfer process between the APF and HM Treasury,” Bailey wrote in a letter to the UK Treasury released Monday.
The profit will be offset against losses stemming from the sales of bonds purchased under the standard QE plan. The Treasury last year cleared an £11 billion transfer to the BOE to cover potential losses in the current fiscal year.
The BOE also said the Treasury can now cut the maximum size of the APF to £851 billion, which includes £16.4 billion in corporate bonds. That’s the sum the Treasury indemnifies the BOE for in case of losses.
Bailey added “the loan from the Bank to the APF, used to fund these temporary purchases, will be repaid today.”
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