Bank of England Announces Simplified Pricing Structure for Discount Window Facility

The Bank of England has implemented a revised pricing model for its Discount Window Facility, effective March 27, 2026. This adjustment follows a previously announced evaluation of the facility and represents the second phase in enhancing reserve provisions through bilateral facilities, building upon modifications made to the Operational Standing Facility in December 2025. The Discount Window Facility enables eligible firms to obtain highly liquid assets, including gilts and reserves, for periods up to 30 days using Sterling Monetary Framework collateral. The new pricing structure introduces fixed rates that are lower than previous levels: 15 basis points for Level A collateral, 25 basis points for Level B collateral, and 50 basis points for Level C collateral. Unlike the prior system where costs increased with borrowing size, these rates remain constant regardless of drawing amount. The changes aim to improve the facility's usability while maintaining incentives for sound liquidity management and preventing market disruption. The Bank encourages participants to conduct regular test transactions of £100,000 and recommends early consultation regarding facility use to ensure timely access. This recalibration aligns with the Prudential Regulation Authority's consultation on modernizing liquidity policy frameworks published earlier in March 2026. The Bank will continue monitoring the facility's parameters and may make future adjustments to ensure effectiveness amid evolving market conditions.