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The Term Funding Scheme: design, operation and impact

Author

Listed:
  • Ginelli Nardi, Bianca

    (Bank of England)

  • Nwankwo, Chukwuma

    (Bank of England)

  • Meaning, Jack

    (Bank of England)

Abstract

In August 2016 the Bank of England’s Monetary Policy Committee announced a package of measures, with mutually reinforcing elements, to support growth and return inflation to target. The measures included a Term Funding Scheme (TFS), which provided funding to participating banks and building societies at interest rates close to Bank Rate. The design of the TFS reflected its primary objective which was to reinforce the pass‑through of the August 2016 cut in Bank Rate to the interest rates faced by households and businesses, against a backdrop where Bank Rate was close to zero. The Scheme appears to have achieved its primary objective with evidence suggesting that the reduction in Bank Rate was passed on to lower lending rates on loans such as mortgages, without significant compression in lenders’ net interest margins or the supply of credit to the economy.

Suggested Citation

  • Ginelli Nardi, Bianca & Nwankwo, Chukwuma & Meaning, Jack, 2018. "The Term Funding Scheme: design, operation and impact," Bank of England Quarterly Bulletin, Bank of England, vol. 58(4), pages 1-10.
    • Handle: RePEc:boe:qbullt:0243
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    File URL: https://www.bankofengland.co.uk/quarterly-bulletin/2018/2018-q4/the-term-funding-scheme-design-operation-and-impact
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    Cited by:

    1. Bailey, Andrew & Bridges, Jonathan & Harrison, Richard & Jones, Josh & Mankodi, Aakash, 2020. "The central bank balance sheet as a policy tool: past, present and future," Bank of England working papers 899, Bank of England.
    2. Anbil, Sriya & Carlson, Mark & Styczynski, Mary-Frances, 2023. "The effect of the Federal Reserve’s lending facility on PPP lending by commercial banks," Journal of Financial Intermediation, Elsevier, vol. 55(C).
    3. Mark A. Carlson & Stefania D'Amico & Cristina Fuentes-Albero & Bernd Schlusche & Paul R. Wood, 2020. "Issues in the Use of the Balance Sheet Tool," Finance and Economics Discussion Series 2020-071, Board of Governors of the Federal Reserve System (U.S.).
    4. Mark A. Carlson & Rebecca Zarutskie, 2022. "Considerations regarding the use of the discount window to support economic activity through a funding for lending program," Finance and Economics Discussion Series 2022-070, Board of Governors of the Federal Reserve System (U.S.).

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