potential issuers. supply chain finance ( scf ) is another route by which smaller firms can potentially get access to credit against high - quality assets. typically, this would arise when a large firm has a number of suppliers who wish to raise immediate finance against their invoices. unfortunately there was no scf market standard and so there was not a viable market that the apf could attempt to catalyse. last autumn, a working group of market participants ( borrowers, lenders, banks etc ) gathered together to develop some proposed standards and try to build a sustainable market in this space. that group is being chaired by stuart siddall, chief executive of the act, and is due to issue a report in the next few months. syndicated loans and asset backed securities a substantial part of lending to larger uk corporates is normally undertaken via syndicated loans. the bank investigated whether there was a market failure or illiquidity premium in this market which could be addressed by making apf purchases. after a thorough investigation, the bank concluded that what was needed was more large - scale bank funding, particularly to replace the foreign bank lenders who had been withdrawing from the uk market. but the appropriate way to address that was through the various schemes in place to support the banks. similarly, the bank investigated the state of securitisation markets. here, there were two problems. first, many investors were extremely wary of buying mortgage - backed securities and similar products, because the crisis had raised uncertainty over their underlying risk characteristics. at the same time there was a huge outstanding stock of such assets already issued, which would swamp any operation aimed at improving liquidity. in the united states the authorities have undertaken substantial purchases of mortgage - backed securities, and funded the purchase of other securitised assets. it is not clear yet whether those markets will be self - sustainable once official intervention comes to an end. in the united kingdom, we have made a range of abs, including mortgage backed securities, eligible collateral in the bank ’ s permanent liquidity insurance facilities as well as in the sls. and the bank intends to consult the market shortly on what the requirements should be in respect of loan - by - loan information for such assets to be eligible in the future. along with other monetary authorities taking similar actions, 8 standardisation of information provision may help improve investor confidence in the underlying securities. non - bank lending also during 2009, the bank used its market and corporate contacts to identify why bank

of monetary policy operations. 5 ( ii ) transactions should be at a discount to fundamental values so that the operations are unattractive to the markets in normal conditions. ( iii ) the operations should help to re - start, or energise markets rather than replace them. these principles all apply to the bank ’ s corporate asset purchases. in fact, when the asset purchase facility ( apf ) was first introduced, the bank was effectively operating as an agent for the government : the purchases were financed by the issue of treasury bills, not by the bank, and the government indemnified the bank against any losses. had the government wanted to, the purchases could have been designed and operated as a fiscal operation and not implemented by the bank. but the correspondence from the chancellor makes it clear that the purchase of private sector assets ( i ) was intended to improve the functioning of markets and so was consistent with a mmlr function and ( ii ) it simultaneously provided a framework for asset purchases as a monetary policy operation by the mpc and so the facility had to be designed to be compatible with that. once the programme of quantitative easing was established, the corporate purchases were funded by creating central bank reserves. but that was consistent with implementing the mpc ’ s monetary policy. motivating the apf schemes the bank ’ s initial apf interventions focussed on sterling corporate bonds and commercial paper. these markets are relatively small. at the end of 2006, before the onset of the crisis, the outstanding stock of sterling non - financial commercial paper was around £5bn, and sterling non - financial corporate bonds totalled around £70bn. that is low compared with the stock of commercial bank lending ( lending by uk resident banks to uk non - financial corporates was £437bn at end 2006 ). but despite their relatively small size, these markets are vitally important. commercial paper commercial paper ( cp ) is a common way for larger firms to manage their day - to - day cash needs. and insufficient cash flow is one of the key ingredients in corporate failures. at the start of 2009, commercial paper spreads were way above any estimate consistent with the risk involved : they implied default rates around 50 % higher than witnessed in the great depression. this market seemed like a prime candidate in which the apf should intervene – and so facilitate otherwise credit - worthy firms in maintaining their access to short - term finance. in trying to catalyse a market, the bank could not operate like a private