In fulfilling its role

As part of its role in domestic money markets, the Bank of England affect the interest rates in the short run. As a government bank and the bank of banks, Bank of England is able to accurately predict the nature of the payment flows from government accounts to the accounts of commercial banks and vice versa, and to act according to circumstances. When the stream of payments from bank accounts in the government accounts exceeds the reverse flow, a situation arises in which the bank reserves of liquid assets are reduced and starts to feel a lack of funds in the money market. Otherwise, accumulated excess liquidity. More often the situation - the emergence of the deficit, which is eliminated by the Bank of England, establishing such a rate at which funds are provided on a daily basis. In order not to work with each individual bank, the Bank of England uses the credentials at home as a mediator. It is a specialized dealers who have stocks trading bills and where to put the major banks extra cash. User home use the services of the Bank of England that can provide cash by buying the securities accounts of homes or giving them loans. The rate at which these operations are carried out, affect the interest rate for the economy as a whole. When the Bank of England alters this rate, commercial banks, as a rule, immediately change its base rate at which the determined deposit rate and lending rate. Short-term interest rates and foreign exchange intervention became a principal tool of monetary policy in the UK. In the past, used other tools. One of the most important tools of modern monetary policy is considered a backup policy, based on changing requirements of the central bank's required reserves for commercial banks and other lending institutions. All the major instruments of monetary control are primarily aimed at regulating the quantity balances on reserve accounts of credit institutions at the central bank or the terms of replenishment of these accounts. As mentioned earlier, commercial banks, the UK contain 0.35% sterling deposits on deposit at the Bank of England. Topic: Banking System