In the event that potential movements in Bank Rate were judged insufficient to achieve the inflation target, the reduction in the stock of assets could be amended or reversed. The Bank is minded to continue to use a variant of the current floor system  20  to control short-term interest  rates as the stock of purchased assets is reduced, with the Bank meeting banks’ demand for central bank reserves in full at Bank Rate. The assets purchased by the MPC are currently indemnified by HM Treasury. Once the APF has been unwound, the Bank will decide what assets to hold to back its liabilities. There is, for example, a strong case for holding some longer maturity assets, such as gilts, outright to back the stable portion of demand for banknotes. Indeed the Bank had made this intention clear and already started to do this prior to the crisis. The overall size and composition of the Bank’s balance sheet will be determined by private demand for reserves under the floor system, what is needed to support efficient market functioning and the financial arrangement between the Bank and HM Treasury under the Memorandum of Understanding published earlier today. Over time, the Bank expects to learn more about the demand for reserves, and hence the likely size of its balance sheet in the medium term, including through engagement with market participants. 19 20  For more details, see the box on page 34 of the November 2015 Inflation Report. See https://www.bankofengland.co.uk/-/media/boe/files/markets/sterling-monetary-framework/red-book.pdf.

Implementation is now being regularly assessed and transparently reported by the FSB and the IMF. This second pillar is deep supervisory cooperation. To manage cross-border challenges to financial stability, international authorities must share relevant information and work together. As the home to four, and host to the other 26, globally systemically important banks, the Bank of England participates actively in all major supervisory colleges, sharing information and expertise gained from overseeing the multitude of complex risks unique to London. We expect the same from those whose firms operate and take on large risks here. The PRA’s open, cooperative approach to supervision means wholesale activity in London can remain globally-integrated and highly efficient, without compromising resilience. 12  The third pillar of responsible openness is ending ”too big to fail”. With enhanced resolution powers and planning, the Bank of England now has the ability to resolve failing banks. The UK’s major banks are on track to complete this year the ring-fencing of their critical domestic high-street businesses from their riskier wholesale activities. And they already hold loss absorbing resources of 25% of their risk-weighted assets against a 2022 requirement of 29%. As a consequence of this progress, market discipline is returning, with the public subsidy enjoyed by the largest banks having fallen by 90%. Now is the time to reap the benefits of these enormous efforts. Platforms are being created for deference to each other’s approaches when they achieve similar outcomes. With the three pillars in place, an open, resilient global financial system is possible.