The United Kingdom's Commercial Paper Facility (U.K. GFC)

Journal of Financial Crises: Vol. 2 : Iss. 3, 459-473. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/20

Yale Program on Financial Stability Working Paper

15 Pages Posted: 26 Oct 2020

See all articles by Claire Simon

Claire Simon

Yale University - Yale Program on Financial Stability

Date Written: October 10, 2020

Abstract

In January 2009, following continued increases in commercial paper spreads, Her Majesty’s Treasury authorized the Bank of England to begin purchasing commercial paper under the Asset Purchase Facility (APF) in order to maintain UK-based corporations’ access to short-term financing. Under the Commercial Paper Facility (CPF), the Bank purchased commercial paper from both primary issuers and secondary holders at a rate that was favorable to issuers during the credit crunch but that would no longer be attractive once the markets recovered. By serving as a backstop, or market maker of last resort (MMLR), the Bank helped to restore liquidity to corporate credit markets. By February 2010, almost all issuers could find more favorable spreads in the market, and in November 2010, the Bank gave 12 months’ notice of the facility’s withdrawal. At peak utilization, the Bank purchased £2.4 billion of commercial paper in late April 2009.

Keywords: commercial paper, Bank of England, liquidity

JEL Classification: G01,G28

Suggested Citation

Simon, Claire, The United Kingdom's Commercial Paper Facility (U.K. GFC) (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 459-473. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/20, Yale Program on Financial Stability Working Paper, Available at SSRN: https://ssrn.com/abstract=3717293

Claire Simon (Contact Author)

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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