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United Kingdom: Discount Window Facility

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Abstract

As the strains of the Global Financial Crisis (GFC) spread internationally in 2008, the Bank of England took measures to provide support to the financial sector. The Bank of England decided to split its Standing Facilities, which faced stigma issues, into the Discount Window Facility (DWF) and Operational Standing Facilities (OSFs). While the OSFs served to set rates and absorb technical frictions in the money markets, the DWF offered banks the opportunity to borrow Treasury-issued gilts for a fee (at a penalty rate), against a range of less liquid collateral. Initially, institutions could borrow for up to 30 days, but this was later expanded in 2009 to permit terms of up to 364 days. The DWF faced similar stigma issues as the Standing Facilities and was not used during the Global Financial Crisis. Despite this lack of usage, firms did pre-position over GBP 265 billion of eligible collateral in the DWF as of 2012.

Suggested Citation

  • Fulmer, Sean, 2022. "United Kingdom: Discount Window Facility," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(2), pages 1074-1089, April.
    • Handle: RePEc:ysm:ypfsfc:v:4:y:2022:i:2:p:1074-1089
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    File URL: https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=1338&context=journal-of-financial-crises
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    Keywords

    Bank of England; broad-based emergency liquidity; Discount Window Facility; DWF; Sterling Monetary Framework; United Kingdom;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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