Part B: Market-based finance

Chart B.8 Market-based finance is an important source of financing for UK companies Net finance raised by UK private non-financial corporations (PNFCs)(a) Sources: Bank of England and Bank calculations. Finance raised by PNFCs from UK MFIs and from capital markets. Data cover funds raised in both sterling and foreign currency, converted to sterling. Seasonally adjusted. Bonds and commercial paper are not seasonally adjusted. Market-based finance is composed of bonds, equities and commercial paper. Owing to the seasonal adjustment methodology, the total series may not equal the sum of its components.

Chart B.9 Aggregate dealer leverage ratios have remained high in the second half of 2016 Dealers’ leverage ratios(a)(b) Sources: Banks’ published accounts, SNL Financial, The Banker Database and Bank calculations. Leverage ratio defined as reported Tier 1 capital (or common equity where not available) divided by total assets, adjusted for accounting differences on a best-endeavours basis. This accounting measure differs from regulatory leverage ratios. Dealers included are Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Mitsubishi UFJ, Morgan Stanley, RBS, Société Générale and UBS. Pre-crisis data also include Bear Stearns, Lehman Brothers and Merrill Lynch.

Chart B.10 Dealers, who act as counterparties in repo trades, appear to be less willing to offer repo facilities Proportion of cash balance placed in repo of a major European asset manager, split by counterparty(a) Source: A European asset manager. Each colour represents one repo counterparty, with eleven in total.

Chart B.11 For UK pension funds, the cost of borrowing cash through repo has increased fourfold since 2014 Gilt repo rates paid by a group of pension fund asset managers in excess of expectations of policy interest rates(a) Source: Bloomberg, data collected from a number of asset managers and Bank calculations. As implied by overnight index swap for the relevant term.

Chart B.12 Overnight repo rates in Europe showed year-end volatility UK, French and German repo rates Sources: Bloomberg and Bank calculations.

Chart B.13 UK life insurers are increasingly investing in illiquid assets (a) Stock of property-related non-linked illiquid assets during 2016(b) Sources: Solvency II submissions and Bank calculations. Trend is also driven in part by insurers reclassifying illiquid assets. Illiquid assets cover: direct property; mortgages and loans; and CIS real estate funds.

Table 1 Service characteristics of the renewed RTGS service Source: ‘A blueprint for a new RTGS service for the United Kingdom’; www.bankofengland.co.uk/markets/Documents/paymentsystem/rtgsblueprint.pdf.