findings. but for the purpose of today i ’ d like to emphasise three things from the broader set of conclusions. first, it highlighted that firms ’ collective actions amplify the initial shock in the scenario, mirroring the theme i ’ ve been drawing out so far in my speech. second, it highlighted the liquidity challenges that some nbfis can face in significant market shocks. third, and most importantly for me in the context of today, during a market stress, banks are generally unlikely to provide all of the additional repo financing nbfis ask for. ensuring the bank ’ s balance sheet can support financial stability that brings me to the final step in my thought process, the bank ’ s balance sheet and our lending facilities. the bank ’ s balance sheet operations, at their core, provide liquidity to the financial system when liquidity is required. andrew bailey, in his goodhart lecture in may, explained the importance of central bank reserves to delivering on our core mandate of maintaining financial stability ( and implementing monetary policy ). [ 19 ] as the safest and most liquid of financial assets, central bank reserves act as the ultimate safe asset in the system underpinning settlement between participants. we therefore need to consider the extent to which we use the bank ’ s balance sheet to provide liquidity to the system. who should we provide that liquidity to and on what terms – in other words, what is the right balance for our balance sheet operations? the bank ’ s balance sheet is going through a period of transition. [ 20 ] we published a discussion paper today setting out the work we are undertaking to re - calibrate the indexed long - term repo ( iltr ) operation, as we transition to a repo - led operating framework. the iltr, alongside the short - term repo ( str ) operation will supply the majority of the stock of reserves to meet the system ’ s liquidity needs, as we transition away from the supply - driven framework we have operated for the last decade, where the mpc ’ s quantitative easing purchases, amongst other things, [ 21 ] supplied abundant reserves to the banking system. that overarching change in the size of our balance sheet and operating framework is not the focus of my speech today, but i would strongly recommend market participants engage with the discussion paper ( accessible via this link ) and share your views. as andrew reiterated in his lecture in may, the bank has been “ open for business ”

getting the balance right : ensuring the bank ’ s balance sheet can support financial stability − speech by dave ramsden given at the official monetary and financial institutions forum, london published on 09 december 2024 dave reflects on developments in the uk financial system through 2024, highlighting the continued shift in activity to non - banks and considering how the bank ’ s balance sheet can be used to support that evolving financial system. speech good afternoon, thank you to omfif for the invitation to speak to you today, it ’ s a pleasure to be here. the end of the year is always a natural time for reflection. this time last year i gave a speech on banking resolution, looking back over a year influenced by the failures of silicon valley bank and credit suisse. [ 1 ] and a year before that i reflected on the significant shocks that had struck the uk economy in 2022. so, at the end of 2024, i ’ d like to take stock again, surveying the landscape of the uk ’ s financial system. and i will do so from my perspective as the bank ’ s deputy governor with executive responsibilities for our balance sheet operations and as a member of the bank ’ s financial policy committee ( fpc ) and prudential regulation committee ( prc ). approaching financial stability risks from that vantage point allows me to think through how we can get the balance right in terms of monitoring and acting on risks first at the firm level, then at the system - wide level, and then in both those pursuits considering how the bank ’ s balance sheet can be best put to use in maintaining financial stability. we should pause on that final point for a moment though. what do we mean by ‘ maintaining financial stability ’? as my colleague, sarah breeden, set out in september financial stability is a concept that can be hard to pin down. in its simplest form we can describe it as the absence of instability, but more fully it means the financial system provides vital services to households and businesses reliably in all states of the world, even when shocks hit, which, in turn, lay the foundations for sustainable growth. figure 1 maps out the various contributors to financial stability in the uk, and it is in my role that i sit across the system - wide issues as an fpc member as well as firm - level risks for banks and insurance companies as an prc member. as sarah set out, though, we don ’ t want to insure against every possible eventuality, instead ensuring res