Central banks

Update to lending and deposit spread of the Operational Standing Facility – Market Notice 8 December 2025

12/08/2025 Bank of England Central banks

In line with the Bank's transition to a repo-led, demand-driven operational framework for providing reserves, the Bank is today announcing a reduction in the spread to Bank Rate of the Operational Standing Facility (OSF). This Market Notice confirms the new, recalibrated spread of the OSF at Bank Rate +15bps for the lending facility and Bank Rate -15bps for the deposit facility. As with all SMF facilities, the OSFs are 'open for business' and should be used by SMF participants for the purposes of liquidity management.

Asset prices, wealth inequality, and welfare: safe assets as a solution

12/08/2025 European Central Bank Central banks

Can rising asset prices reduce wealth inequality? This paper builds a continuous-time heterogeneous-agent general equilibrium in which entrepreneurs hold risky private capital and traditional savers hold safe assets. Safe-asset expansions—via financial innovation, public debt, or a stable equity bubble—operate through a single pass-through: they lower entrepreneurs’ undiversified risk exposure, compress risk premia, and raise the interest rate.

Asset prices, wealth inequality, and welfare: safe assets as a solution

12/08/2025 European Central Bank Central banks

Can rising asset prices reduce wealth inequality? This paper builds a continuous-time heterogeneous-agent general equilibrium in which entrepreneurs hold risky private capital and traditional savers hold safe assets. Safe-asset expansions—via financial innovation, public debt, or a stable equity bubble—operate through a single pass-through: they lower entrepreneurs’ undiversified risk exposure, compress risk premia, and raise the interest rate.

Banks’ regulatory risk tolerance

12/04/2025 European Central Bank Central banks

We employ 68 quarters of data – including from non-public supervisory sources – to study how 17 US and 17 euro-area banks balance the risk of breaching regulatory requirements against the cost of maintaining and speedily restoring “management” buffers. We find that steady-state management buffer targets systematically declined and regulatory risk tolerance (RRT) rose following the Great Financial Crisis, especially at banks experiencing a stronger increase in capital requirements.

Banks’ regulatory risk tolerance

12/04/2025 European Central Bank Central banks

We employ 68 quarters of data – including from non-public supervisory sources – to study how 17 US and 17 euro-area banks balance the risk of breaching regulatory requirements against the cost of maintaining and speedily restoring “management” buffers. We find that steady-state management buffer targets systematically declined and regulatory risk tolerance (RRT) rose following the Great Financial Crisis, especially at banks experiencing a stronger increase in capital requirements.

Estimating the natural rate of interest in a macro-finance yield curve model

12/03/2025 European Central Bank Central banks

Using a novel macro-finance model we infer jointly the equilibrium real interest rate r*, trend inflation, interest rate expectations, and bond risk premia for the United States. In the model r* plays a dual macro-finance role: as the benchmark real interest rate that closes the output gap and as the time-varying long-run real interest rate that determines the level of the yield curve. Our estimated r* declines over the last decade, with estimation uncertainty being relatively contained. We show that both macro and financial information is important to infer r*.

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