Loans to banks and credit facilities

Matthew Cooper made this Freedom of Information request to Bank of England

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

The request was successful.

Dear Bank of England,

It is my understanding that the Bank of England makes loans and offers credit facilities to UK commercial banks.

I would like to inquire as to where the money that the bank loans comes from. Are these loans and credit facilities financed by the Banks creation of new bank reserve credit? Or do the funds come from the banks own accounts?

Yours faithfully,

Matthew Cooper

Enquiries, Bank of England

Dear Mr Cooper

We acknowledge receipt of your email dated 24 February (our ref FF
25083).  We will reply in due course.

If you have any queries please contact the Bank's Public Information and
Enquiries Group on 020 7601 4878.

Yours sincerely

Public Information and Enquiries Group

Bank of England | Threadneedle Street | London | EC2R 8AH | +44 20 7601
4878

[1][Bank of England request email]

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Enquiries, Bank of England

1 Attachment

Dear Mr Cooper

Please find attached a response to your enquiry dated 24 February.

Yours sincerely

Public Information and Enquiries Group

Bank of England | Threadneedle Street | London | EC2R 8AH | +44 20 7601
4878

[1][Bank of England request email]

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Dear Enquiries,

Thank you. Would I be correct in saying that the bank records the loan agreement or collateral given by the borrower as an asset and then creates a liability in the form of a credit to the borrowing banks' reserves?

Does the Bank always create new money when it extends credit to commercial banks, or does the money sometimes come from the Bank's own accounts? Wouldn't there be excess inflation if every time a commercial bank wanted to borrow, new money had to be created?

Thank you for your help

Yours sincerely,

Matthew Cooper

Enquiries, Bank of England

We acknowledge receipt of your e-mail dated 4 March (our ref FF 25299).

We will reply in due course.

If you have any queries please contact the Bank's Public Information and Enquiries Group on 020 7601 4878.

Public Information & Enquiries Group
Bank of England |Threadneedle Street|London|EC2R 8AH|+44 20 7601 4878
[Bank of England request email]

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Enquiries, Bank of England

1 Attachment

Dear Mr Cooper

Please find attached a response to your enquiry of 24 March.

Yours sincerely

Public Information and Enquiries Group

Bank of England | Threadneedle Street | London | EC2R 8AH | +44 20 7601
4878

[1][Bank of England request email]

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M Groves left an annotation ()

I'm not sure the FOIA is designed to force personnel at the BoE to explain basic economic theory to you...

Matthew Cooper left an annotation ()

Well strangely enough, M Groves, this is information that is unavailable to the general public, and is not what I would call 'basic economic theory'

Matthew Cooper

Dear Enquiries,

You still haven't answered the question:

"Does the Bank always create new money when it extends credit to
commercial banks, or does the money sometimes come from the Bank's
own accounts? Wouldn't there be excess inflation if every time a
commercial bank wanted to borrow, new money had to be created?"

Rather, you provided a generalization which has not helped me.

Could you please tell me whether the bank ever simply uses money (or credit) from its own accounts to loan to other institutions, in the credit extension process, or whether the bank creates new liability credit every time.

Thank you for your help

Yours sincerely,

Matthew Cooper

Enquiries, Bank of England

We acknowledge receipt of your e-mail dated 3 May (our ref FF 25430).

We will reply in due course.

If you have any queries please contact the Bank's Public Information and Enquiries Group on 020 7601 4878.

Public Information & Enquiries Group
Bank of England |Threadneedle Street|London|EC2R 8AH|+44 20 7601 4878
[Bank of England request email]

show quoted sections

Enquiries, Bank of England

1 Attachment

Dear Mr Cooper

Please find attached a letter in response to your email dated 3 May.

Yours sincerely

Public Information and Enquiries Group

Bank of England | Threadneedle Street | London | EC2R 8AH | +44 20 7601
4878

[1][Bank of England request email]

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Matthew Cooper

Dear Enquiries,

Thank you for your clarification, but you still haven't answered my question, which was:

Could you please tell me whether the bank ever simply uses money(or credit) from its own accounts to loan to other institutions, in the credit extension process, or whether the bank creates new liability credit every time.

Thank you for your help

Yours sincerely,

Matthew Cooper

Enquiries, Bank of England

Dear Mr Cooper

We acknowledge receipt of your email dated 26 May (our ref FF 25506). 
We will respond in due course.

If you have any queries please contact the Bank's Public Information and
Enquiries Group on 020 7601 4878.

Yours sincerely

Public Information and Enquiries Group

Bank of England | Threadneedle Street | London | EC2R 8AH | +44 20 7601
4878

[1][Bank of England request email]

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Enquiries, Bank of England

1 Attachment

Dear Mr Cooper

Please find attached a response to your email dated 26 May below.

Yours sincerely

Public Information and Enquiries Group
Bank of England | Threadneedle Street | London | EC2R 8AH | +44 20 7601 4878
[Bank of England request email]

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Matthew Cooper

Dear Enquiries,

Thank you for this clarification, this information will be extremely useful

Yours sincerely,

Matthew Cooper