Bank of England widens range for reserves

PUBLISHED : Friday, 21 September, 2007, 12:00am
UPDATED : Friday, 21 September, 2007, 12:00am

Bank of England said it would offer an extra #4.4 billion (HK$68.81 billion) in its open market operations and widen the range for banks' reserves with it to plus or minus 60 per cent.

'This will help to ensure that the secured overnight rate is in line with the Bank rate,' the central bank said.

At the start of each month, banks tell the Bank of England what they want to hold in reserves at the central bank which should cover them for the biggest difference between the amount of money they receive and what they pay out.

Normally, banks are obliged to hold 1 per cent above or below that balance when averaged over the month or else they get penalised.

But they will now have a much bigger buffer for any unforeseen cash needs.