International Financial Markets & Institutions Tutorial 1 Bank of England Centre Bank: is standing at the centre of the UK's

s financial system, the Bank is committed to promoting and maintaining monetary and financial stability as its contribution to a healthy economy. Bank of England (BoE): is the UKs centre bank and has special functions that help keep the economy and financial systems stable (set interest rates to keep inflation low to preserve the value of your money; issues banknotes with special security features so you know your money is the real thing; assesses the health of the financial system and work with others to keep it stable) ( http://www.bankofengland.co.uk/about/pdfs/whatthebankdoes1.pdf ) Monetary policy M0 (Narrow money) M0 comprisedsterling notes and coin in circulation outside the Bank of England (including those held in banks and building societies tills), and banks operational deposits with the Bank of England. M0 data differ from M4 and other balance sheet statistics because they were compiled as a monthly average of weekly observations. They also included all notes and coin in circulation, whereas M4 only includes those held by the non-bank non-building society private sector.
(http://www.bankofengland.co.uk/mfsd/iadb/notesiadb/M0.htm#_DEFINITIONS )

(Any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy) M1 M2 M1; Time-related deposits, saving deposits Non-institutional money-market funds M0 Demand deposits, (current accounts)

M3: The European Central Banks (ECBs) broad monetary aggregate is M3. This encompasses also two narrower aggregates, M1 and M2. Euro-area M3 comprises: Monetary liabilities of euro-area MFIs and central government (Post Office and

Treasury) vis--vis non-MFI euro-area residents excluding central government, in all currencies: - currency in circulation (M1) - overnight deposits (M1) - deposits with agreed maturity up to 2 years (M2) - deposits redeemable at notice up to 3 months (M2) - repurchase agreements - money market fund shares/units and money market paper - debt securities up to 2 years. The estimate of M3 compiled by the Bank of England for the UK comprises monetary liabilities of MFIs in the UK vis--vis non-MFI UK residents excluding central government, in all currencies. The UK reporting system does not currently identify the maturity breakdowns used in the euro-area definition; these are therefore estimated. The euro-area aggregate does not include the adjustments for transit items and the inter-MFI reporting difference, which are made for UK M4 (see definition of M4). A reconciliation table which illustrates the differences between M4 and this estimate of M3 is available on request. These data therefore provide an estimate of M3 for the UK. These data replaced the M3H European harmonised aggregate, which was previously published to facilitate international comparisons between EU member states. (http://www.bankofengland.co.uk/mfsd/iadb/notesiadb/M3.htm ) (M2; All large time deposits; Insitutional money-market funds; Short-term repurchase agreements; Other larger liquid assets) Monetery policy committee (MPC) Bank rate (or bank interest rate and present rate): Prior to September 1971, the main policy objectives of the authorities had been control over the supply of credit available to the private sector and control over the level and structure of interest rates. The former objective was attained by the imposition of quantitative and qualitative restrictions on bank lending and setting the conditions for hire purchase credit. The latter was achieved by an interest rate set by the Bank of England - Bank Rate. A net flow of funds from the Bank and Government to the Banking Sector created a surplus of funds in the money market. Conversely, a net flow of funds in the opposite direction created a shortage. Since Government receipts do not match Government expenditure, the Bank intervened in the markets through the Discount Houses, by issuing and buying Treasury Bills to ensure that the banking system was in balance at the end of the day. Bank Rate had a direct influence on interest rates in the domestic banking system, being the rate at which the Bank of England, acting as lender of last resort, would normally lend to members of the discount market against security (e.g. Treasury Bills

and eligible bills). It was also a conventional reference point for the rates which the London Clearing Banks paid on deposits and charged on advances. Bank Rate had less influence on the rates of non-resident and other banks operating in the UK, which then, as now, were linked to market rates, especially those in the interbank market. (http://www.bankofengland.co.uk/mfsd/iadb/notesiadb/Wholesale_discount.htm#BA NK%20RATE ) Since the May Report, the MPC has maintained Bank Rate at 0.5% and its stock of purchased assets at 200 billion. Strains within financial markets intensified amid heightened concerns about the fiscal positions of several euro-area countries. These strains initially eased somewhat following the announcement of the support package agreed by eurozone leaders on 21 July, but subsequently re-emerged. In the United Kingdom, banks raised significantly less wholesale term funding, and credit conditions for households and smaller businesses remained tight. Weakness in broad money and credit growth persisted. Partly reflecting these developments in the United Kingdom and elsewhere, expectations of the near-term path of Bank Rate were lowered and ten-year government bond yields fell to record lows.

Inflation (present rate and present Government target 2%) Consumer Price Index (CPI) 120.1 August Reatail Price Index 236.1 August Quantitative Easing (QE) (the present level) 200bn Treasury Office for Budget Responsibility (OBR) Deficit (or budget deficit) National Debt: At end March 2011 general government gross consolidated debt at nominal value was 1130 billion; 76.7 per cent of GDP Gross Domestic Product (GDP :95.56431) National Income Recession Fiscal Policy Corporation Tax (present rate) 26% Income Tax (present rate) 20%

Trend & Current 1/US$1.56820/1.14090 Exchange rate FTSE 100 Index and who made up the 100: 5408.94 Average House Price in the UK Average salary in the UK Average Life Expectancy for Men & Women in the UK