The 2012 MoU sets out a panoply of safeguards against the repetition of such an incident, including a requirement for timely notification from the Bank to HM Treasury of any risk to public funds, and analysis of the systemic impact of alternative policy options. The MoU makes it clear that the Chancellor has sole responsibility for the use of public funds, approves all ELA (including the terms on which it is provided), and may if necessary direct the Bank to extend ELA – though this is a backstop power, whose use is not expected to be considered in the majority of crisis situations. Where it is judged necessary to keep ELA covert for a period in order to minimise the risks to financial stability, key Parliamentary Chairs will be briefed orally by senior officials on any government indemnity attached to such lending – and full disclosure to Parliament would be made at the earliest subsequent opportunity once the risk of damage to the public interest had passed. 6 Covert operations, particularly those involving a fiscal component, are often cited as the most troubling forms of LOLR by those concerned that central banks have a bias to lend “too much”. In the United Kingdom, the disclosure of large covert loans to HBOS and RBS in late 2009 (more than a year after the loans were advanced) triggered a public debate about the  3  http://www.bankofengland.co.uk/markets/Documents/smf/annualreport15.pdf. 4  http://www.bankofengland.co.uk/about/Documents/mous/statutory/moufincrisis.pdf. 5  “The view from No.11” by Nigel Lawson, pages 402-6. 6  See page 22 of http://www.publications.parliament.uk/pa/cm200910/cmselect/cmtreasy/181/181.pdf.

Ex post transparency of aggregate amounts lent is provided immediately for market-wide liquidity provision, and with a lag for any usage of the bilateral Discount Window. The Bank also publishes an annual report on the operation of its published facilities 3. The Bank’s published facilities now provide a rich toolkit for responding to a wide range of sterling liquidity needs. But not every eventuality can be predicted in advance – and UK institutions might on occasion require assistance in larger size, against alternative collateral, or in currencies other than sterling. The terms and conditions for any bilateral lending done outside of the Bank’s published facilities – so-called “Emergency Liquidity Assistance (ELA)” – would use as a starting point those in the SMF, including pricing and collateral eligibility and haircuts. But, recognising the potential for discretionary deviation from these terms, and the large sums of money that such lending can involve, ELA is also subject to enhanced governance and accountability arrangements, published in a Memorandum of Understanding (MoU) 4 between the Bank and HM Treasury. These arrangements are somewhat shaped by history. In his autobiography 5, the then Chancellor of the Exchequer Nigel Lawson records his deep annoyance at being given only half an hour’s notice by the Bank in October 1984 to decide whether to provide a government guarantee to back a large loan to Johnson Matthey Bankers, “a bank of no great consequence”, which the Bank had been working for some time to save.