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Is The Boe Still Lender Of Last Resort?

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When will the BoE lend to the people at 0.5% and cut out the middle man.

Like most people here i am struggling to understand how exactly the BOE operates but it seems to me that:

1. The BOE is known as the lender of last resort. It is not the lender of second resort. Supposedly you go to the BOE when you have nowhere else to go. Basicly if you go there you are going to wish you had an alternative.

2. Supposedly as a well established policy the BOE lends to the banking system in a risk free manner by taking the appropriate security.

3. The Settlement banks like HSBC or Barclays operate reserves balances at the BOE which must have a none negative reserve balance overnight. Ie overdrafts are only allowed during the day. All interbank payments are working via these accounts. None settlement banks get IOU's from the settlement banks, but the settlement banks only do IOUS's until end of day or as agreed. During the day many IOU's are settled immediately using CHAPS which operates via the BOE reserve balances the settlement banks have at the BOE. The effect of this is that money is continually flowing in and out of the reserve balances. A bank in trouble must find reserves at night or it is busted.

2. The BOE pays to a settlement bank the BOE rate on the settlement banks posative reserves balance held at the BOE.

3. If the commercial bank wants to borrow from the BOE overnight so that the reserves balance is none negative it must deposit approved security to do that and the actual arrangement is that the security is sold overnight to the BOE and must be bought back again the following morning.

So if the above is so I am supposing the BOE gets some benefit from the interest which the Commercial bank looses or otherwise the BOE would not be lender of last resort?

Can anybody clarify my understanding please?

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