UK Treasury to tap Bank of England during coronavirus market disruptions

UK government plans to dip into the Bank of England as a temporary source of financing in coronavirus economic crisis.

A man wearing protective face mask walks past the Bank of England in the City of London. Picture: AFP

The UK Treasury said on Thursday that it plans to use the Bank of England as a temporary source of financing during any market disruptions due to the coronavirus.

The Treasury’s so-called ways and means facility at the central bank acts like an overdraft, and was last used to significant extent during the financial crisis more than a decade ago.

The British government’s planned use of the facility might fuel a belief among some economists and investors that the scale of the economic crisis triggered by the novel coronavirus could require governments to abandon a long-held taboo on tapping their central banks for cash.

The UK Treasury said its main source of financing will continue to be borrowing in financial markets and the BOE facility will only be used to provide cash in moments of market stress. Any drawings will be repaid by the end of the year.

Dow Jones Newswires