Miscellaneous Bank of England Levy Background to the CRD scheme
The Cash Ratio Deposit (CRD) scheme funds the Bank of England’s (the Bank’s) monetary policy and financial stability functions. Under the scheme, deposit-taking institutions (i.e., banks and building societies) with eligible liabilities above a minimum threshold are required to place non-interest bearing deposits at the Bank. The Bank invests these deposits into interest bearing assets (currently only UK gilts), with the income generated used to fund the Bank’s monetary policy and financial stability operations.
	The Bank’s expenditure on policy functions, as currently funded by the CRD scheme, includes Monetary Analysis and the Monetary Policy Committee (MPC), Markets and Banking, Research and statistics, Financial Stability Strategy and Risk, Resolution, International policy, the elements of FMI supervision not funded by the FMI levy and elements of PRA activity not funded by the PRA levy.
	The CRD scheme does not fund the following functions of the Bank:
its remunerated activities - including its banking services, services to HM Treasury (such as the management of the note issue and the Exchange Equalisation Account) and lending operations for the Bank’s own account,
its operations acting as the PRA, which are funded by the PRA levy, and
its FMI supervision, which is funded by the FMI levy.
	The CRD scheme runs in five-year cycles. The scheme was last calibrated in 2018 to deliver for the 2018-23 period a fixed income target of £169 million per annum. In 2018, an indexation-based approach was introduced to make the CRD scheme responsive to changes in gilt yields and to provide a smoother income profile. In effect, this means that when gilt yields decrease, participants are required to increase their deposits at the Bank, so that the Bank can invest in more gilts, in an attempt to meet the income target. As of June 2021, the overall size of the cash ratio deposits were £12.1 billion. The largest 20 institutions accounted for 83% of the total deposits, eight of which each contributed more than £200 million in deposits under the scheme.