Andrew Hauser: Waiting for the exit - QT and the Bank of England's long-term balance sheet

Speech by Mr Andrew Hauser, Executive Director for Markets of the Bank of England, at the European Bank for Reconstruction and Development, and hosted by the Association for Financial Markets in Europe (AFME), International Swaps and Derivatives Association (ISDA)& International Capital Market Association (ICMA), London, 17 July 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

For such an apparently arcane topic, the size and composition of central bank balance sheets can provoke passionate reactions.

'Too large', and central banks may find themselves accused of usurping the role of financial markets, harming innovation and inducing imprudent behaviour; fuzzying the boundary between monetary and fiscal policy, providing a 'dangerous temptation for - the political class'; or giving unmerited financial rewards to reserves holders.

'Too small', and central banks may be criticised for being asleep at the wheel at times of crisis; failing to play their part in ensuring an adequate supply of risk-free assets in the economy to maintain financial stability during peacetime; or hampering the effectiveness of monetary policy transmission.