Bank of England opens Contingent NBFI Repo Facility for applications
The Bank of England has announced the opening of the Contingent Non-Bank Financial Institution Repo Facility for applications.
Overview
On 28 January 2025, the Bank of England (the Bank) announced that the new Contingent Non-Bank Financial Institution Repo Facility (CNRF) is open for applications.
The CNRF is a new contingent lending facility developed by the Bank. Its purpose is to address future episodes of severe market dysfunction that threaten UK financial stability arising from shocks that temporarily increase non-bank financial institutions' (NBFIs) demand for liquidity. The Bank's recent system-wide exploratory scenario exercise (SWES) final report concluded, amongst other things, that repo market resilience is central to supporting core markets in stress and that, during a market stress, banks are unlikely to provide all of the additional repo financing NBFIs ask for, despite their willingness to draw on central bank lending facilities. The CNRF (at that stage, still under development) was highlighted as a key next step to help support repo market resilience and the effective functioning of other markets during stress.
The CNRF will supply cash to participating NBFIs against UK sovereign debt (gilts) for a short lending term during times of severe gilt market stress. As a contingent facility, the CNRF will be activated by the Bank at its discretion and the pricing and terms will be calibrated by the Bank at that time.
Eligibility
The CNRF is open to applications from insurance companies, defined benefit occupational pension schemes and liability driven investment funds (LDI funds) that meet the eligibility criteria. They must also make a material contribution to gilt market functioning, as measured by their holding of gilts. As set out in the January 2025 Market Notice, a market value of £2 billion gilts will normally be regarded as meeting this requirement (and this minimum level is expected to be reviewed annually).
More information on the eligibility criteria, the application process, terms and fees are available from the Bank's CNRF webpage.
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