Consultant Zone

Term Funding Scheme – planning for repayment

Robin Fieth, CEO of the Building Societies Association opened the 2018 BSA annual conference with a key note address outlining the building society successes in the current environment and highlighting the challenges faced by their boards today.

For us, there was one challenge that stood out as a recurring theme throughout the conference and ‘fringe’ sessions – the repayment of the monies withdrawn from the Bank of England Term Funding Scheme (TFS).

Putting that challenge in to perspective, building societies and banks have borrowed around £127bn of cheap money that generally (depending on the drawdown date) must be repaid by the end of 2021. As Fieth said, “Many including our prudential regulators are actively starting to focus on the likely impact on both wholesale funding and retail deposit taking, as the Bank of England money printing press stops and starts to go in reverse”. Although there will be those who will have found comfort in the Governor’s recent comments, where it was suggested that the Bank of England could turn back to quantitative easing measures if the results of the ongoing negotiations result in a “disorderly” Brexit, the reality is that TFS repayments will need careful planning and some lateral thinking.

It was interesting to hear Fieth allude to the BSA alternative funding initiatives which are being discussed with BSA members following the commencement of an ‘alternative funding project’ a year ago. We like, many other interested parties, await with interest the outputs from the project group.

Having completed several FCA initial lending reviews and securitisation reviews where mortgage portfolios are being traded, Rockstead is ideally placed to assist in a number of ways, including ‘eligible collateral’ assessment.