PART 3Requirements as to backing assets

Backing assets6

1

An authorised bank must have backing assets in accordance with these Regulations and the rules.

2

The following kinds of assets are specified as backing assets—

a

Bank of England banknotes of such denominations and series as are specified in the rules;

b

current coins of the United Kingdom; and

c

funds placed on deposit in sterling in an account held by the Bank of England and designated by the Bank of England for the purposes of this regulation.

3

Backing assets in the form of Bank of England banknotes must be held either—

a

by the Bank of England; or

b

at one or more locations for the time being approved by the Bank of England for this purpose.

4

Backing assets in the form of coins must be held at one or more locations for the time being approved by the Bank of England for this purpose.

5

At least 60% of a bank’s backing assets which are held by a bank in respect of its banknotes in circulation must consist of assets of the kinds specified in paragraph (2)(a) and (b).

6

The rules may prohibit an authorised bank from maintaining more than a specified proportion of its backing assets—

a

in locations approved under paragraph (3)(b) or (4); or

b

in the form of current coins of the United Kingdom.

7

The rules may specify requirements with which an authorised bank must comply where it—

a

places funds on deposit in an account designated under paragraph (2)(c); or

b

holds backing assets in a location approved under paragraph (3)(b) or (4).

8

Rules may specify the procedure by which authorised banks may acquire or dispose of Bank of England banknotes and coins held as backing assets.