LONDON (Reuters) – Banks in Britain say they will want to hold 400 billion to 500 billion pounds ($496-$620 billion) of reserves with the Bank of England as it reduces the size of its balance sheet, Governor Andrew Bailey said on Wednesday.
The BoE is unwinding a vast pile of reserves – cash it created to buy government bonds in successive rounds of quantitative easing – shifting it from an environment of excess reserves to a level that may fall below the equilibrium that reflects market appetite.
“We talk to the banks a lot about it, they give us numbers which are in the range of 400 billion to 500 billion pounds – but we don’t precisely know and it can change over time,” Bailey told lawmakers from parliament’s Treasury Committee.
Bailey said it was possible that reserves could fall to that level later this year, in line with earlier estimates for the timing.
In a speech last May, Bailey said he expected what the BoE calls the ‘preferred minimum range of reserves’ to be somewhere between 345 billion pounds and 490 billion pounds.
($1 = 0.8061 pounds)
(Reporting by David Milliken and Suban Abdulla, writing by Andy Bruce; Editing by William Schomberg)
