was prompted by the mpc ’ s policy decisions to cut bank rate to the effective lower bound and its subsequent decision to loosen monetary conditions via asset purchases. it is unlikely that the regime would have been adopted without these developments and so as and when the mpc starts to “ normalise ” the level of bank rate, the bank is likely to review whether to retain the current “ floor ” system indefinitely or whether it should move to a different medium - term operating framework. one obvious option would be to return to the framework used before the introduction of qe – which was known as “ reserves averaging ”. that operating regime was introduced after a careful review of alternative regimes open to the bank in the mid - 2000s. but the world has changed markedly since that review was undertaken. banks have structurally higher demand for central bank reserves than they did before the crisis, reflecting in part liquidity regulations, and as i noted earlier, a far wider range of institutions can directly access our balance sheet than was the case a decade ago. moreover, the structure of money markets has evolved considerably over this period as banks have responded to lessons learned during the crisis and the impact of post - crisis regulation. these changes have been sufficiently profound that the bank no longer maintains a presumption that it will return to a version of reserves averaging that existed prior to 2009. see 3. 1 - 3. 4 of the september 2014 mmlg minutes http : / / www. bankofengland. co. uk / markets / documents / money / mmlgsep14. pdf. bis central bankers ’ speeches while such a decision remains possible, the choice of medium - term operating framework is now a genuinely open question and is likely to be become a key issue for the bank as it considers the future design of the smf. whatever decision the bank makes about its medium - term monetary policy framework it is likely that the floor system will be retained for some time after bank rate is increased from its current level. conclusion the smf defines how the bank interacts with markets, when implementing monetary policy and providing liquidity insurance. it is important that we are open and accountable for the operation of the smf. the mmlc itself and the new smf annual review process help us achieve that aim. in recent years we have transformed the smf, and we believe for the better. but reform of the smf is an on - going process. as my remarks today have made clear, that process is incomplete : further

chris salmon : remarks on the sterling monetary framework ( smf ) annual report remarks by mr chris salmon, executive director for markets of the bank of england, at the money markets liaison committee meeting, london, 13 july 2015. * * * i would like to thank eleanor broughton, ronnie driver, sarah john, ben martin and ben morley for their comments and contributions. the bank will hold an open forum this autumn. the forum will facilitate an open debate about the role of markets in society, and provide an opportunity to review how key financial markets are functioning. the bank ’ s own mechanism for interacting with markets, when implementing monetary policy and providing liquidity insurance, is set out in the sterling monetary framework ( smf ). markets work more effectively when participants are open and transparent about their activities, and the bank aspires to meet that standard in relation to its own market operations, including through publishing an annual report on the effectiveness of the smf. this committee brings together key participants in sterling money markets and is a natural venue to discuss the operation of smf. as such, today i want to summarise the key themes that were covered in our most recent annual reports and to sketch out some of the issues that the bank is likely to confront in coming years. these are areas where your future feedback will be essential as we work to maintain the effectiveness of the smf. liquidity insurance we have made a number of significant changes to the way the bank offers liquidity provision through the smf. as the governor has remarked, these changes have been aimed at providing more liquidity, at longer terms, at cheaper rates, and to a wider range of counterparties with the objective of ensuring that the bank of england is “ open for business ”. as discussed in the smf annual report, the main highlights over the past couple of years have included the extension of smf membership to broker - dealers and central counterparties ( ccps ), and the expansion of the monthly indexed long term repo ( iltr ) operations. the extension of the smf to broker - dealers and ccps gives non - banks access to the bank of england ’ s balance sheet for the first time. non - banks are becoming increasingly important to the financial system. the bank considered three key themes before widening smf membership : whether the non - bank institutions were systemically important, whether they were exposed to sterling liquidity risk, and whether they were appropriately prudentially regulated so that usage of the