##fsme unwind mark an important shift in the size and composition of our future balance sheet. but they should not be seen as the bank stepping away from its appropriate role in financial markets. we have a range of facilities in our sterling monetary framework which allow firms to borrow liquidity in the form of reserves as needed. we encourage usage of these facilities as part of normal liquidity management, and while we would not expect firms to rely solely on our facilities ( and we have priced those facilities accordingly ), they are also not intended to be used as a last resort. [ 9 ] we are, and remain, ‘ open for business ’. as our balance sheet reduces to whatever level is the new normal, reserves will fall towards the minimum level of reserves that banks need and want, as shown in chart 4. this aggregate level of reserves demanded by banks for transactional and precautionary liquidity needs forms what we call the preferred minimum range of reserves ( pmrr ). at some point during the unwind, the stock of reserves will eventually approach the minimum level needed by banks. at that point, banks are likely to respond by seeking to borrow reserves in money markets, increasing the rates they are willing to pay to do so, and thereby causing short - term interest rates to rise relative to bank rate. if no other actions are taken, this would impair the transmission of monetary policy to the wider economy. so, in 2022 we announced the launch of the short term repo ( str ) to supply reserves on demand at bank rate against gilt collateral on a weekly basis, to ensure that market interest rates remain aligned with bank rate. we expect usage of the full set of our liquidity facilities to rise as the level of reserves in the system falls as qt and tfsme unwind progress. as already set out, the level of the pmrr and the timing for when it will be reached are both uncertain, and indeed may change over time, as andrew bailey flagged in his loughborough lecture earlier in february. chart 4 : stylised supply of reserves during apf unwind one key issue is the appropriate mix of assets that will back these reserves. we will decide this in consultation with relevant stakeholders, including hmt. with that in mind, i want to draw an important distinction between the mpc ’ s reduction of the bonds held in the apf, and the future of the bank ’ s balance sheet. our approach to this issue differs

. the bank can track its connection to bond markets all the way back to its incorporation in 1694. the bank came into being with the specific purpose of raising funds for england ’ s war effort against france. to help raise funds, the government created a new joint - stock company, where investors were effectively purchasing government debt to become shareholders in the company. that company was the bank of england and so began the 330 years, and counting, relationship between the bank and bond markets. the bank ’ s role in, and interaction with, markets has evolved over time. in july 1914, financial markets were shaken by the sudden outbreak of world war one, with a run taking place in both the london money market and the london stock exchange. the bank stepped in, acting as a ‘ market maker of last resort ’ and buying substantial quantities of bills of exchange which resolved the immediate liquidity crisis. more generally for much of its history the bank, as the government ’ s banker, leveraged its market connections to act as the key agent and adviser to the government on debt management. [ 3 ] at the same time as being given operational independence for monetary policy in 1997 responsibility for debt management passed to the newly created debt management office ( dmo ), though the bank continued to be the government ’ s banker. as the earlier chart showed for the twelve years from 1997 to 2009 the bank ’ s direct involvement with the gilt market, while it continued to be important, was nevertheless limited to the kind of operations described by the bank official quoted by david kynaston in his one - volume history of the bank, “ although we have less of a role in gilts, we have quite a portfolio of gilts for our own customers, and we continue operating ( for the exchange equalisation account ) in the foreign exchange market. ” the bank as a significant holder of government debt the global financial crisis ( gfc ) of 2007 - 9 marked a watershed moment across all financial markets. amongst other things, its aftermath led to the adoption of quantitative easing ( qe ) in some jurisdictions, which transformed the role of central banks in the bond market, from engaged observers and occasional traders to the largest participants. across different jurisdictions, bond purchases aimed to lower long - term interest rates, boost economic activity, and meet the inflation target in the medium term. the 15th anniversary of the mpc ’ s decision to start qe in march 2009 is next week. since the gfc, the global economy including the