Another Currency Runs Out: BOE Introduces "Collateral Term Repo Facility" To Deal With Sterling "Shortages"

Tyler Durden's picture

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SheepDog-One's picture

Well Central Bankster cabal, YOU ran it all into the iceberg on purpose, so now whats your next move?

LeBalance's picture

"the boat was run by remote control, we are back on the mainland, have fun SD1."

signed: Squidly.

SheepDog-One's picture

Well unfortunately THEY are the ones out on the boat thats now sinking, not me!

falak pema's picture

London bridge, london bridge...

Ahmeexnal's picture

I'm off to the coinshop!

Mr Lennon Hendrix's picture

Good call!  Gold just hit support. 

We will need to see it test $1705 to confirm.

bernorange's picture

The rules of rock, paper, scissors are going to get a test in the near future.  Paper isn't going to cover rock (metal/ore) for long.

www.pmbug.com

sqz's picture

You should see some of the crap the BoE would accept with that collateral facility.

Normal: http://www.bankofengland.co.uk/markets/money/publications/narrow_omo_col...

Crap: http://www.bankofengland.co.uk/markets/money/publications/dwf_collateral...

In Normal bucket:

Sovereign and central bank debt (including associated strips) of UK (other than HMG Treasury bills and gilts), Canada, France, Germany, the Netherlands and the United States issued in either the domestic currency or in sterling, euro or US dollar.

In Crap bucket: any piece of paper, including "un-listed", except synthetics.

It's like central banks are swallowing markets whole or becoming the ultimate CCP... Python swallowing PIGS literally except that meal is rank!

On the one hand, moves like these in isolation are probably a good thing to avoid concentration risk in sovereigns (which are clearly not riskless).

On the other hand, moves like these are just going to be used as a crazy excuse to pump liquidity into the current system instead of allowing it to deleverage and restructure for sustainability. That liquidity has to go somewhere in the end and the system is currently set up for it to flow fast and hard into anything that looks even remotely tempting, typically some inefficient consumer durable or investment-draining, bubble-blowing financial assets.

Urban Redneck's picture

"against the widest range of collateral" is key- Bear, Lehman, MF, et al. their balance sheet shit didn't stink any worse than anyone else's.  They are ALL bankrupt and dead, the others are just the walking dead (bankrupt with a banking license) so when the shadow banking system counterparties or clearinghouses hike collateral or margin requirements on certain balance sheet instruments the Too Big Too Die can swap shit for fiat with the CB, and in the process postpone their day of reckoning.  It's probably rather hard to deleverage after you're already bankrupt...  The question is which TBTF card carrying member of the members-only DWF club is weak hand prompting the CB move and will the other hyenas move in for a kill or quick buck at tax-payer expense?

 

 

Mr Lennon Hendrix's picture

Cameron's pants are falling down....

green888's picture

the problem with lifeboats is that when they are full, do you stop to pick up more, imperilling everyone already on board, or do you sail on by ?

Manthong's picture

When are people going to realize that in central banking terms the word "Facility" really describes a FANTASY. 

Or is the BOE going to go down to the basement vault, pull out a pallet of pounds sterling (hmm.. sterling..) and roll it up to the teller window to dispense to needy banks.

AngryGerman's picture

"you play the violin until the ship has sunk.

we throw some small crippled children out of the lifeboats and take their places!

thanks for asking, your friendly neighborhood bankster."

LawsofPhysics's picture

Someone is going to take a "pounding" on this.

EscapeKey's picture

Some people just don't know when to quid.

LeBalance's picture

something wicked is sterling in the Sidhe of London.

TheFourthStooge-ing's picture

Before the day is out, Bernanke will be shilling for the ECTR.

 

The Swedish Chef's picture


Some people just don't know when to squid.

Ghordius's picture

LOL

------

Good timing, BoE. You'll need soon all cool acronyms, probably so from January on, when the new "speculation target" will be presented:

"The Isle With 1'000% Total Debt" - soon in a theather near you...

CPL's picture

Considering that the Pound Sterling doesn't have sterling silver backing it....it deserves everything coming to it.

 

The queen is not pleased I suppose, although with squid running the currency into the ditch to force the UK under the EU umbrella, I wonder how long it will take the queen to understand that she's not as rich as she once thought she was.

hollowbody's picture

The Queen doesn't and needn't give a shit about any of it (at least, not in the immediate future)....under English law EVERYONE only takes title to 'their' LAND through HER. That's right, EVERYONE. In addition to that, she is almost certainly the largest owner of quality farmland in actual possession in the UK.

http://www.whoownstheworld.com/about-the-book/largest-landowner/

To back those rights up, something which her 'family' has been able to achieve for quite some time now, she is titular head of a government which has the FOURTH HIGHEST military spending in THE WORLD, every member of which swears alligience to HER and NOT the government, and which as the events in Northern Ireland prove, baulks not at murdering its own 'subjects' where rights to large parts of it are challenged.....

Ghordius's picture

Don't forget: a nice chunk of NY belongs to her, too.

gojam's picture
Preparing for bank run.
Everybodys All American's picture

Wouldn't it be logical to assume that everyone is hoarding cash in Europe leaving the banks under a liquidity crunch? Don't tell anyone.

gojam's picture

Measures BofE have taken to increase liquidity.

QE, £275 billion has been created over the last 3 years. The BofE buys gilts on the secondary market from UK banks. This is basically money laundering and it explains why UK borrowing appears to have gone up this year. They are borrowing the money they themselves created with the QE. It's a zero sum in the end for the Government but it does have the side effect of providing liquidity to UK banks.

Credit Easing, at the PBR Osborne announced up to £40 billion of Credit Easing. This money guarentees loans made to UK companies so that in the event that banks need their money back quickly the Government will effectively buy the loans off the banks again this provides liquidity to UK banks while protecting UK companies.

Extended Collateral Term Repo (ECTR), " This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity." in other words it is designed to provide quick liquidity to banks in the event of runs on UK banks.

Overall it's a fairly robust contingency on the part of the UK but it's pretty obvious what they fear is the likely outcome and today's announcement of the ECTR facility so clearly telegraphs that fear that they wouldn't have done it unless they thought the threat was near and imminent.

It's not enough to solve the problem but it should be enough to stop the UK descending into chaos, banks, business, deposits, and withdrawals appear to have been covered.

CPL's picture

I agree on the bank run, but it might be the same case as Greece and Italy, the bank run process involves the following.

 

  • Run to bank
  • Take money out
  • Turn money into PM's.

No clue why they are attempting to print liquidity into the system when the outcome has been to dump fiat and pick up physical cash (gold/silver).

gojam's picture

I expect the UK would hope to just keep things running normally for as long as possible. If it comes to it the Eurozone will be chaos.

The average person will be happy as long as the money comes out of the machine. Businesses will be happy if their debts aren't called.

This facility is for Sterling only so it's likely to be a domestic contingency.

hedgeless_horseman's picture

 

 

...the ability to ensure that the banking sector has a sufficient access to sterling liquidity

NEED POUNDS, DOLLARS, OR EUROS? 

CALL (020) ROTH-CHILD

LOAN OFFICERS ARE WAITING TO TAKE YOUR CALL.

valley chick's picture

you got to be damn kidding me!  Just call it the Extended Facility for the Fricking World!  There ...that took care of it.

LeBalance's picture

we are from Uranus and we're here to help.

sabra1's picture

aaah! put a plug in it!

Liquid Courage's picture

No, no, no! Shocking how inept the Brits seem to be when it comes to devising proper acronyms. CTRF! WTF? Can't even pronounce that. Acronyms are important tools in the propagandist tool kit, and no-one gets this better than the Americans. A good acronym must be pronouncable, evocative, at least a bit witty and, hopefully, comforting.

Also, fun to mess with. OK the floor is open for suggestions for naming the ultimate Financial Action Relief Trust.

How about: VAst Monolithic Ponzi Investment REsource (VAMPIRE) and then of course: Sequential Knock-out World Integration Deployment (SKWID)

YesWeKahn's picture

That's why people call it a currency, not "money".

tony bonn's picture

when a central banker's lips are moving, he is lying....there is a shortage...

"to offer sterling liquidity in an auction format against the widest range of collateral. "

i would like to collateralize my underwear, a used buick, and a pile of postage stamps.....there, that should do it...

Financial_Guardian_Angel's picture

When yet another central bank, in this case the BOE, proactively uses the word "shock" in relation to funding deficiency (in this case the GBP) if even with the phrases "contingency" and "there is currently no shortage" a brief week after the global central bank cartel did the same to assure the world of USD funding availability, it may be time to wonder i) just how bad is the global FX crunch in any currency (EUR most certainly included - see near record ECB deposit facility usage), ii) just how broken is the shadow banking system - as a reminder with Lehman it was money markets (a major component of shadow liquidity), now it is repo (smaller, but still critical component of shadow banking) that is failing and iii) when will this crisis escalate to the next logical step?

Do you realize this is one sentence? LOL

Smiddywesson's picture

Now just who do we know that is obsessed with banking and is perpetually run-on periodphobic?  Hmmm?  And Robo always shows up in his/her posts?  Hmmm, hmmm?

RobotTrader's picture

Funny how people are still "clamoring" for paper currency.

It is in acute short supply.

To the point where governments are taking radical action.

Meanwhile, nobody wants gold, gasoline, grains, etc.  They are selling hard assets in order to find more "paper".

Not only that, but virtually every California Muni-Bond ETF is making new 52-week highs today.

http://clearstation.etrade.com/cgi-bin/bbs?post_id=9437812&usernm=wndysrf

Meredith Whitney must be in a Malibu rehab facility by now.

 

somethingisrotten's picture

MoMo Lizard, go back to playing your LULU and your LALA.  Your record in this area is pathetic.

CPL's picture

They haven't been though, only assholes that want their worthless paper are the banks.  The same assholes that are in trouble.  So how does this do anything but create inflation?

 

You should buy some of those bonds Greg, they seem like a great deal.  Go all in.  You seem very confident that you'll get something back from them.  You can then take all the "profits" and put them into your site.

 

It's a win win for all of us if you do.

SheepDog-One's picture

All the free paper currency anyone could have ever dreamed of printing in 100 lifetimes, and theyre all still in deep trouble. Gee, who could have ever seen that one comin?

SheepDog-One's picture

MoMoFaded still desperately cheerleading for a rally so he can get back to his entry point of DOW 12,700 months ago when he was here posting his blogs scolding all bears they were about to be left in the dust.

Of course, actual track record means nothing to the Faded one....thats all just a cntrl/alt/del fix.

Village Smithy's picture

Please, do not speak disparagingly about Meredith, I,I, I love her.

Dr. Gonzo's picture

Everyone wanted to buy internet stocks in 1999 too. The same people wanted to buy a house in 2007. People are funny that way.

catacl1sm's picture

rational irrationality or incorrect information. Take your pick, both fit the scenario.

Smiddywesson's picture

Meanwhile, nobody wants gold, gasoline, grains, etc.

Correct, paper is king, until it isn't, and seeing as the throne room is ablaze, I figure it's reign is just about done.

Green for Robo, even if the post was just a kick at the anthill, he is essentially correct.  LULU and Netflix are great, until they're not, and paper gold is just paper until that little game is over too.  (probably by mid 2012, but I said the same about 2011 so what do I know?)

ZeroPoint's picture

Time to pawn the Crown Jewels.