The Bank of England (BoE) is working to maintain an “ample” level of reserves in the UK financial system, steering away from both scarcity and the current surplus, according to Nathanael Benjamin, the BoE’s executive director for financial stability strategy and risk. Speaking at an event hosted by the OMFIF central banking think tank on Wednesday, July 16, 2025, Benjamin outlined the bank’s strategy as it unwinds past quantitative easing (QE) asset purchases.

The BoE is reducing its QE holdings by £100 billion ($134 billion) annually, though some investors expect this pace to slow over the next year. Additionally, liquidity provided to banks during the COVID-19 era is expiring, pushing banks to rely more on the BoE’s weekly auctions for 7-day and 6-month funds. These funds are accessible in exchange for high-quality collateral, such as British government bonds or select loans.

Benjamin emphasized the need for banks to maintain sufficient collateral to secure reserves during both stable and turbulent times. “Banks must have enough ‘dry powder’ to access additional reserves from us in times of stress and consider what collateral they can use in private-sector funding markets,” he said. He also highlighted the growing role of non-bank financial firms in UK lending, underscoring the importance of incentives to ensure banks with direct BoE access distribute liquidity to other parts of the system rather than hoarding excess reserves.

By calibrating its monetary and regulatory frameworks, the BoE aims to foster a balanced financial system where reserves are “neither scarce nor abundant—just ample,” Benjamin said. This approach is designed to promote efficient liquidity distribution and enhance financial stability across the UK.