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					      DOCUMENTATION FOR THE
BANK OF ENGLAND’S OPERATIONS UNDER
THE STERLING MONETARY FRAMEWORK




                     3 August 2007
                                                                                                                      2




                                         OVERALL CONTENTS

INTRODUCTION..........................................................................................................3
ELIGIBILITY CRITERIA.............................................................................................5
TERMS AND CONDITIONS......................................................................................12
OPERATING PROCEDURES ...................................................................................59
                                                                                       3




DOCUMENTATION FOR THE BANK OF ENGLAND'S
OPERATIONS UNDER THE STERLING MONETARY
FRAMEWORK

1 This sets out the Documentation for the Bank of England’s Operations under the
Sterling Monetary Framework. The Documentation comprises the Eligibility Criteria
for firms to become Participants in the Bank’s Open Market Operations or have
access to reserve accounts or have access to the standing deposit and lending
facilities; the Terms and Conditions applying to participation in the Bank’s facilities;
and the Operating Procedures (which, in relation to the Bank’s facilities, include
details of eligible securities, electronic tenders, timetables, margin requirements in
respect of repurchase transactions, deposit terms, outright purchases, swaps, ISDA
collateral requirements, and contact and communication details).

2     For OMO Participants which wish to conduct swap transactions with the Bank
they must also sign up to the Bank’s pro forma 1992 ISDA Master Agreement and
Credit Support Annex. A copy of the Bank’s pro forma Schedule, Paragraph 11 and
Confirmation will be available on the Bank’s website. OMO Participants should also
have regard to the Electronic Tendering System User Guide for the Bank of England
Electronic Tendering System. A copy of the User Guide is on the Bank’s website
www.bankofengland.co.uk/markets/money/omo/outright_purchases.htm.

3         The Documentation establishes standard Terms and Conditions for all
Participants in the Bank’s facilities. These Terms and Conditions may be amended by
the Admission Letter where, in the case of any Participant incorporated outside
England and Wales, amendment is necessary to ensure that the Documentation will be
enforceable in accordance with its terms under all applicable foreign laws, or where
otherwise the Bank considers modifications to be necessary or appropriate.

4     Unless expressly stated in the Documentation (see for example paragraph 5
below) or otherwise agreed with the Bank, the Documentation does not apply to any
existing or new Global Master Repurchase Agreements.

5 Under the Terms and Conditions an event of default by the Participant under any
other legal agreement with the Bank will (where the Bank serves a Default Notice) be
an Event of Default under the Documentation. Also, if there is an Event of Default
under the Documentation, the Bank may treat this as an event of default under any
other relevant legal agreement with the Bank and include the resulting Net Default
Amount (as defined) in any overall calculation for set-off purposes.

6 The Bank will generally require any Participant incorporated outside the United
Kingdom to provide a legal opinion regarding its power and authority to enter into
transactions with the Bank under the Documentation and to meet its obligations
thereunder; the Bank may also require the provision of legal opinions on whether,
under all applicable laws, other than those of England and Wales, those obligations
constitute valid and legally binding obligations of the Participant enforceable in
accordance with their terms.
                                                                                      4




7 It will be noted that under clause A.8 of the Terms and Conditions the Bank may
amend or vary the Terms or Conditions and Operating Procedures at any time, albeit
without retroactive effect on outstanding transactions. This provision may be used, for
example, to enable the Bank to respond to a contingency, such as a major operational
or financial disruption, or to make changes to the framework in the light of
experience. The Operating Procedures set out some of the measures that the Bank
may take to respond to a contingency. A general description of the Bank of England’s
Operations under the Sterling Monetary Framework is set out in the Red Book,
published on the Bank’s website at
www.bankofengland.co.uk/markets/money/publications/index.htm.
                                                                                                               3 August 2007 5




                                                      CONTENTS


CLAUSE                                                                                                                PAGE


ELIGIBILITY CRITERIA FOR PARTICIPATION IN THE BANK OF
      ENGLAND’S    OPERATIONS      UNDER               THE           STERLING
      MONETARY FRAMEWORK.......................................................................... 8

1.         OPEN MARKET OPERATIONS ..................................................................... 8

2.         STANDING FACILITIES................................................................................. 9

3.         RESERVE ACCOUNT FACILITY ................................................................ 10

4.         LEGAL OPINIONS......................................................................................... 10

TERMS AND CONDITIONS FOR PARTICIPATION IN THE BANK OF
    ENGLAND’S OPERATIONS UNDER THE STERLING
           MONETARY FRAMEWORK........................................................................ 12

1.         INTRODUCTION, SCOPE AND APPLICATION ........................................ 12

PART A ....................................................................................................................... 13

GENERAL TERMS AND CONDITIONS ................................................................. 13

1.         REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS;
           CONDITION PRECEDENT ........................................................................... 13

2.         NO WAIVERS................................................................................................. 14

3.         SINGLE AGREEMENT; ENTIRE AGREEMENT........................................ 14

4.         COMMUNICATIONS; THE ELECTRONIC TENDERING SYSTEM ........ 16

5.         NOTICES......................................................................................................... 18

6.         COSTS AND EXPENSES............................................................................... 19

7.         OPERATING PROCEDURES........................................................................ 19

8.         AMENDMENTS ............................................................................................. 19

9.         COMMENCEMENT, SUSPENSION AND TERMINATION ...................... 20

10.        CROSS-DEFAULT AND SET-OFF ON DEFAULT TERMINATION ........ 20

11.        CONFIDENTIALITY...................................................................................... 21

12.        CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 ......................... 22
                                                                                                                               6




13.        GOVERNING LAW........................................................................................ 23

14.        JURISDICTION .............................................................................................. 23

15.        AGENT FOR SERVICE OF PROCESS ......................................................... 23

PART B........................................................................................................................ 25

TERMS AND CONDITIONS FOR REPURCHASE TRANSACTIONS.................. 25

1.         APPLICATION ............................................................................................... 25

2.         INITIATION AND TERMINATION ............................................................. 25

3.         MARGIN MAINTENANCE ........................................................................... 26

4.         DBV TRANSACTIONS.................................................................................. 28

5.         PAYMENTS AND DELIVERIES .................................................................. 30

6.         SUBSTITUTION............................................................................................. 32

7.         INCOME PAYMENTS ................................................................................... 36

8.         REPRESENTATIONS AND WARRANTIES................................................ 37

9.         EVENTS OF DEFAULT................................................................................. 37

10.        CLOSE-OUT AND LIQUIDATION OF OBLIGATIONS ON THE
           OCCURRENCE OF AN EVENT OF DEFAULT .......................................... 41

11.        DEFAULT INTEREST ................................................................................... 46

PART C........................................................................................................................ 47

TERMS AND CONDITIONS FOR DEPOSITS......................................................... 47

1.         APPLICATION ............................................................................................... 47

2.         DEPOSITS....................................................................................................... 47

3.         REPAYMENT OF DEPOSITS ....................................................................... 47

4.         INTEREST....................................................................................................... 48

5.         SUSPENSION AND VARIATION ................................................................ 48

6.         REPRESENTATIONS AND WARRANTIES................................................ 48

PART D ....................................................................................................................... 49

TERMS  AND   CONDITIONS                FOR           OUTRIGHT                   PURCHASE
    TRANSACTIONS ........................................................................................... 49

1.         APPLICATION ............................................................................................... 49
                                                                                                                               7




2.         INITIATION AND SETTLEMENT ............................................................... 49

3.         REPRESENTATIONS AND WARRANTIES................................................ 49

PART E........................................................................................................................ 50

GLOSSARY ................................................................................................................ 50
                                                                           3 August 2007   8




        ELIGIBILITY CRITERIA FOR PARTICIPATION IN THE BANK OF
      ENGLAND’S OPERATIONS UNDER THE STERLING MONETARY
                          FRAMEWORK

This document sets out the criteria for an institution to be eligible to participate in the
Bank of England’s Operations under the Sterling Monetary Framework.

Any capitalised term used in the Eligibility Criteria and not otherwise separately
defined herein, shall bear the same meaning as set out in the glossary to the Terms
and Conditions for Participation in the Bank of England’s Operations under the
Sterling Monetary Framework.

1.     OPEN MARKET OPERATIONS

If an institution is an authorised person as defined in the Financial Services and
Markets Act 2000 and if in the Bank’s opinion:

(a)    an institution is an active intermediary in the sterling money markets or is
       eligible to be a Reserve Account Participant;

(b)    where an institution is a member of a Group and is not the primary entity
       within the Group, a guarantee in a form satisfactory to the Bank is provided by
       the primary entity of the Group;

(c)    an institution has the operational capability to participate in and efficiently to
       settle Transactions with the Bank;

(d)    an institution acts in a way that is consistent with the Bank’s objective of
       achieving competitive and fair sterling markets;

(e)    an institution contributes to the Bank's market intelligence work in support of
       its functions as a monetary authority;

(f)    none of the events set out in clause B.9 of the Terms and Conditions has
       occurred in relation to an institution;

(g)    no objection to an institution’s admission to or participation in the Bank’s
       Operations under the Sterling Monetary Framework has been made by the
       Financial Services Authority or by any other relevant UK or overseas
       regulatory body;
                                                                            3 August 2007   9




(h)    no other member of an institution’s Group is an OMO Participant; and

(i)    if the institution wishes to enter into Swap Transactions, it (or its Guarantor)
       must be rated at least Aa3 (AA-) or higher by two of Moody’s, Standard &
       Poor’s and Fitch, and it must have signed the ISDA Master Agreement,

subject to the Bank’s standards of prudence and risk, the institution will be eligible to
participate in Open Market Operations with the Bank.

The Bank may, at its absolute discretion, waive, add to or vary any or all of the above
requirements.

2.     STANDING FACILITIES

If in the Bank’s opinion:

(a)    an institution is an eligible institution (as defined in paragraph 1 of Schedule 2
       to the Bank of England Act 1998) and is currently required to make payments
       of cash ratio deposits to the Bank under the terms of that Act, or is a CHAPS
       or CREST sterling settlement bank;

(b)    an institution has the operational capability to participate in and efficiently to
       settle Transactions with the Bank;

(c)    an institution acts in a way that is consistent with the Bank’s objective of
       achieving competitive and fair sterling markets;

(d)    an institution contributes to the Bank's market intelligence work in support of
       its functions as a monetary authority;

(e)    none of the events set out in Clause B.9 of the Terms and Conditions has
       occurred in relation to an institution;

(f)    no objection to an institution’s admission to or participation in the Bank’s
       Operations under the Sterling Monetary Framework has been made by the
       Financial Services Authority or by any other relevant UK or overseas
       regulatory body; and

(g)    no other member of an institution’s Group is a Standing Facilities Participant,

the institution will be eligible to participate in Standing Facilities with the Bank.
                                                                         3 August 2007   10




The Bank may, at its absolute discretion, waive, add to or vary any or all of the above
requirements.

3.     RESERVE ACCOUNT FACILITY

If in the Bank’s opinion:

(a)    an institution is a Standing Facilities Participant;

(b)    an institution is an eligible institution (as defined in paragraph 1 of Schedule 2
       to the Bank of England Act 1998) and is currently required to make payments
       of cash ratio deposits to the Bank under the terms of that Act;

(c)    an institution has the operational capability to participate in and efficiently to
       settle transactions with the Bank;

(d)    an institution acts in a way that is consistent with the Bank’s objective of
       achieving competitive and fair sterling markets;

(e)    an institution contributes to the Bank's market intelligence work in support of
       its functions as a monetary authority;

(f)    none of the events set out in clause B.9 of the Terms and Conditions has
       occurred in relation to an institution;

(g)    no objection to an institution’s admission to or participation in the Bank’s
       Operations under the Sterling Monetary Framework has been made by the
       Financial Services Authority or by any other relevant UK or overseas
       regulatory body; and

(h)    no other member of an institution’s Group is a Reserve Account Participant,

the institution will be eligible to participate in the Reserve Account Facility, provided
that the Bank will also extend the Reserve Account Facility to any institution which is
a CHAPS or CREST sterling settlement bank.

The Bank may, at its absolute discretion, waive, add to or vary any or all of the above
requirements.

4.     LEGAL OPINIONS

4.1    Where an institution is incorporated in a jurisdiction other than England and
                                                                        3 August 2007   11




Wales, it must supply to the Bank on request and in form and substance satisfactory to
the Bank one or more legal opinions confirming under the laws of the jurisdiction or
jurisdictions in which it is incorporated and has its head or main office and, if
appropriate, in which it has a branch or office from which it is acting in connection
with the Bank’s Operations under the Sterling Monetary Framework:

(a)    the institution’s power and authority to enter into and to execute the
       Documentation and, where relevant, the ISDA Master Agreement, and the
       performance of its obligations thereunder; and

(b)    that the terms and conditions set out in the Documentation constitute valid and
       legally binding obligations of the institution enforceable in accordance with
       their terms.

4.2    Where a guarantee is to be provided by the primary entity of a Group in
accordance with clause 1(b) of these Eligibility Criteria and that primary entity is
incorporated in a jurisdiction other than England and Wales, the institution must
supply to the Bank on request and in form and substance satisfactory to the Bank one
or more legal opinions confirming under the laws of the jurisdiction or jurisdictions in
which the primary entity is incorporated and has its head or main office:

(a)    such primary entity’s power and authority to enter into and to execute the
       guarantee and the performance of its obligations thereunder; and

(b)    that the terms and conditions set out in the guarantee constitute valid and
       legally binding obligations of such primary entity enforceable in accordance
       with their terms.
                                                                      3 August 2007   12




TERMS AND CONDITIONS FOR PARTICIPATION IN THE BANK OF
ENGLAND’S OPERATIONS UNDER THE STERLING MONETARY
FRAMEWORK

1.    INTRODUCTION, SCOPE AND APPLICATION

1.1   These Terms and Conditions together with the Operating Procedures:

(a)   set out the terms and conditions for participation in the Bank’s Operations
      under the Sterling Monetary Framework;

(b)   govern Repurchase Transactions and Outright Purchase Transactions entered
      into between the Bank and the Participant and Deposits accepted by the Bank
      in the course of those Operations under the Sterling Monetary Framework;

(c)   Swap Transactions are governed by the ISDA Master Agreement and by the
      Documentation.

1.2   These Terms and Conditions are divided into four parts:

(a)   Part A sets out general provisions that apply to all of the Bank’s Operations
      under the Sterling Monetary Framework.

(b)   Part B sets out additional provisions that apply to Repurchase Transactions.

(c)   Part C sets out additional terms and conditions that apply to Deposits.

(d)   Part D sets out additional terms and conditions that apply to Outright Purchase
      Transactions.

(e)   Part E sets out a glossary of defined terms used in the Documentation.

1.3    These Terms and Conditions, the pro forma ISDA Master Agreement and the
Operating Procedures (including any amendments made from time to time in
accordance with clause A.8) will be published on the Bank’s website at
www.bankofengland.co.uk.
                                                                         3 August 2007      13

                                                                   Part A: Terms and Conditions



                                        PART A

                     GENERAL TERMS AND CONDITIONS

1.     REPRESENTATIONS,        WARRANTIES           AND   UNDERTAKINGS;       CONDITION
PRECEDENT


1.1    The Participant represents and warrants to the Bank that:

(a)    it is duly authorised to enter into these Terms and Conditions and to enter into
       and perform the Transactions contemplated hereby;

(b)    it complies with the Eligibility Criteria;

(c)    the person entering into these Terms and Conditions and entering into any
       Transaction on its behalf is or, in the case of any Transaction, will at the time
       such Transaction is entered into be duly authorised so to act;

(d)    it has obtained all authorisations of any governmental authority or regulatory
       body required by it in connection with these Terms and Conditions and the
       Transactions to be effected under it and such authorisations remain in full
       force and effect;

(e)    the execution, delivery and performance of the Documentation and the
       Transactions to be effected under it will not violate any law, regulation, by-
       law or rule applicable to the Participant; and

(f)    it is entering into, and will duly perform its obligations under, these Terms and
       Conditions and all Transactions as principal.

All representations and warranties made and given under these Terms and Conditions
shall be deemed to be made upon the signature and return to the Bank by the
Participant of its copy of the Admission Letter and repeated on each occasion on
which a Transaction is entered into.

1.2    The Participant undertakes to the Bank that:

(a)    it will, to the extent permitted by applicable law, inform the Bank in advance
       of any proposed major organisational and business change relating to it,
       including but not limited to major changes of control or ownership, and it will
       inform the Bank without delay of any material changes to the matters in the
                                                                          3 August 2007      14

                                                                    Part A: Terms and Conditions



       information provided by the Participant prior to entering into these Terms and
       Conditions;

(b)    it will comply with the provisions of the Documentation;

(c)    it will on demand pay the Bank’s charges and reimburse the Bank for all fees,
       costs, charges and other expenses reasonably incurred by the Bank in
       connection with Operations under the Sterling Monetary Framework, as more
       particularly set out in the Operating Procedures; and

(d)    where the Participant has provided a legal opinion or opinions pursuant to the
       Eligibility Criteria, the Participant shall notify the Bank without delay of any
       developments which could cast material doubts on any of the details in the
       opinion(s) and shall arrange for the opinion(s) to be updated upon request by
       the Bank, stating whether the points in the original opinion(s) are still valid
       and noting any material changes.

1.3     The Bank’s obligation to make any payment in connection with any
Transaction or Swap Transaction or otherwise under the Documentation shall be
subject to the condition precedent that no Event of Default, or no event which, upon
the service of a Default Notice would be an Event of Default, shall have occurred and
be continuing with respect to the Participant.

2.     NO WAIVERS

No indulgence or concession granted by the Bank (including, without limitation, the
entering into or performance of any Transaction or any other business at any time
when an Event of Default has occurred and is continuing) and no omission or delay
on the part of the Bank in exercising any right, power or privilege under the
Documentation or under any Transaction shall act as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any further
exercise thereof or the exercise of any other right, power or privilege. The rights and
remedies of the Bank provided in these Terms and Conditions, the remainder of the
Documentation and any Transaction are cumulative with and not exclusive of any
rights of lien, sale, set-off or retention or other rights or remedies which the Bank may
have at common law, by statute or otherwise howsoever.

3.     SINGLE AGREEMENT; ENTIRE AGREEMENT

3.1    The Parties acknowledge that, and have entered into these Terms and
                                                                          3 August 2007      15

                                                                    Part A: Terms and Conditions



Conditions and will enter into each Transaction in consideration of and in reliance on
the fact that, all Transactions constitute a single business and contractual relationship
and are made in consideration of each other. Accordingly, each of the Parties agrees
that:

(a)    subject to and without prejudice to clause A.10 and B.10, the Bank shall in
       case of an Event of Default be entitled to set off claims by the Participant and
       apply property held by the Bank and/or any other deposits made by the
       Participant with the Bank against obligations owing by the Participant to the
       Bank; and

(b)    payments, deliveries and other transfers made by either of them in respect of
       any Transaction shall be deemed to have been made in consideration of
       payments, deliveries and other transfers in respect of any other Transactions,
       and the obligations to make any such payments, deliveries and other transfers
       may be applied against each other and netted.

3.2    The Documentation sets out the entire terms and conditions and understanding
between the Parties in respect of the subject matter thereof save in relation to Swap
Transactions in respect of which the ISDA Master Agreement also applies. It is
agreed that:

(a)    the Participant has not entered into the Documentation or any Transaction in
       reliance upon any representation, warranty or undertaking of the Bank which
       is not expressly set out or referred to in the Documentation;

(b)    the Participant shall not have any remedy in respect of misrepresentation or
       untrue statement made by the Bank which is not contained in the
       Documentation nor for any breach of warranty which is not contained in the
       Documentation; and

(c)    this clause shall not exclude any liability for, or remedy in respect of,
       fraudulent misrepresentation.

3.3    The provisions of these Terms and Conditions and of each Transaction shall
be binding upon and inure to the benefit of the Parties hereto and their respective
successors in title and permitted assigns.

3.4    The rights and obligations of the Parties under these Terms and Conditions
and under each Transaction shall not be capable of assignment by either Party without
                                                                         3 August 2007      16

                                                                   Part A: Terms and Conditions



the prior written consent of the other.

4.     COMMUNICATIONS; THE ELECTRONIC TENDERING SYSTEM

4.1    Communications shall be made by any method that the Bank may specify,
through the Operating Procedures or otherwise.

4.2     The Bank shall be entitled without further enquiry to accept and act on any
request, instruction or other communication or purported request, instruction or other
communication received by the Bank notwithstanding that it may afterwards be
discovered that that request, instruction or other communication was made in error,
was not genuine or was not authorised by the Participant or (if sent electronically) was
not initiated through the terminal and associated equipment from which they were
purported to have been sent. Any such request, instruction or other communication
on which the Bank so acts shall for all purposes of the Documentation be treated as
effective and binding on the Participant in accordance with its terms and, accordingly,
neither the Bank nor any of its servants or agents shall incur any liability or be
responsible for any loss, damage, expense or claim whatsoever by reason of so acting
except to the extent that such loss, claim or expense is shown to be attributable to
wilful default or reckless disregard of the Bank’s obligations on the part of the Bank
or its servants or agents. Neither the Bank nor any of its servants or agents shall be
liable for any loss of business, loss of profit or consequential damage of any kind
whatsoever.

4.3    The Participant undertakes at all times:

(a)    to procure that all requests, instructions and other communications are made or
       given by persons who are duly authorised to make or give them on its behalf
       and are within the scope of the authority of the person making or giving them;

(b)    to provide the Bank upon request with a list of all persons who are for the time
       being authorised to send requests, instructions and other communications by
       the Electronic Tendering System or electronic mail or sign facsimile
       transmissions relating to Transactions or otherwise relating to the matters to
       which the Documentation relates and with such particulars with respect to
       such persons as may from time to time be specified in the Operating
       Procedures;

(c)    promptly to provide the Bank with particulars of any change in the persons
       and particulars referred to in clause A.4.3(b);
                                                                         3 August 2007      17

                                                                   Part A: Terms and Conditions



(d)    to comply with any procedures set out in the Operating Procedures or
       otherwise agreed between the Participant and the Bank with respect to the
       identification, confirmation or authentication of requests, instructions or other
       communications by the Participant or with the maintenance of security with
       respect to or in connection with such requests, instructions or other
       communications.;

(e)    to ensure that all passwords and other activation data relating to the Electronic
       Tendering System are not easily guessed or predictable and are kept
       confidential and secure in order to prevent their unauthorised use;

(f)    not to use the Electronic Tendering System upon and after becoming aware of
       the occurrence of any significant breach by the Participant of its obligations,
       or of any warranty or representation, under these Terms and Conditions unless
       and until the Bank has expressly consented to the Participant so doing;

(g)    to be responsible for the maintenance of security over the SWIFT Equipment
       acquired or used by the Participant for the purposes of sending and receiving
       SWIFT messages to and from the Electronic Tendering System and, in the
       case of any such equipment used or available for use by the Participant and
       any other participant, to be jointly and severally responsible with such other
       participant for the maintenance of security over all such equipment;

(h)    to keep its SWIFT Keys secure and protect them against loss, damage,
       modification and unauthorised use; and

(i)    to comply in all respects with the Electronic Tendering System User Guide in
       so far as its provisions are applicable to the Participant.

4.4    The Bank reserves the right to suspend the operation of the Electronic
Tendering System, wholly or partially, or to vary the operational timetable, by reason
of any circumstances whatever beyond the Bank's reasonable control, including
without limitation partial or total failure, malfunction or overload of the Electronic
Tendering System, or any other emergency.

4.5     The Participant acknowledges and agrees that the timer facility in the
Electronic Tendering System is provided for the Participant’s convenience and the
Bank shall not be liable for the Participant’s failure to submit any bid or make any
other communication through the Electronic Tendering System within any deadline
prescribed by the Bank. The time stamp applied to any bid in accordance with the
                                                                            3 August 2007      18

                                                                      Part A: Terms and Conditions



Operating Procedures shall be final and binding.

4.6     The Bank, and its representatives and agents shall not be liable, save in the
case of wilful default or reckless disregard of the Bank's obligations, for any liability,
claim, loss, damage or expense of any kind or nature caused directly or indirectly by
the operation by the Bank of the Electronic Tendering System or any part thereof or
any inadequacy thereof for any purposes or any deficiency or defect therein or any
delay in providing or failure to provide the Electronic Tendering System or any
interruption or loss of the Electronic Tendering System or loss of business, loss of
profit or other consequential damage or any damage whatsoever and howsoever
caused (including but without prejudice to the foregoing by reason of machine or
computer malfunction or error and also any suspension or variation pursuant to clause
A 4.4).

5.     NOTICES

5.1     Subject to clause A.5.2, any notice required to be given under the
Documentation shall be deemed to be duly served if left at or sent by registered or
recorded delivery post or by electronic mail or other electronic means or facsimile
transmission, in the case of a notice to the Bank at Bank of England, Threadneedle
Street, London EC2R 8AH, e-mail address omo.agreement@bankofengland.co.uk,
fax number 020 7601 5810, marked for the attention of the Chief Dealer, Sterling
Markets Division, or to such other address or fax number as the Bank may notify to
the Participant in writing, and in the case of notice to the Participant at the address, e-
mail address and fax number notified by the Participant to the Bank in writing from
time to time. Any such notice shall be deemed to be duly served:

(a)    if left at the address of the Party to be served, at the time when it is so left (or,
       if it is left on a day that is not a Business Day, at 8.15 a.m. on the next
       following Business Day);

(b)    if sent by post, on the second Business Day following the day of posting;

(c)    if sent by electronic mail, when the message is received; and

(d)    if sent by facsimile transmission, when confirmation of receipt is received.

In proving the giving of a notice under this clause A.5.1 it shall be sufficient to prove
that the notice was delivered at the address for service or that the envelope containing
such notice was properly addressed and posted (as the case may be).
                                                                      3 August 2007      19

                                                                Part A: Terms and Conditions



5.2     The Operating Procedures may provide for any notice to be given orally,
including by telephone; any such notice shall be deemed to be served when it is
actually given.

6.     COSTS AND EXPENSES

6.1     Each Party agrees to pay and bear its own costs and expenses incurred in
connection with the preparation and execution of the Documentation and the entering
into of each Transaction.

6.2    The Participant agrees to pay or reimburse to the Bank all of its costs and
expenses (including legal expenses) together with any value added tax thereon,
incurred in connection with the enforcement of any of its rights under the
Documentation or any Transaction.

7.     OPERATING PROCEDURES

7.1    These Terms and Conditions are supplemented by Operating Procedures
which set out further terms governing each type of Transaction and explain the
procedures involved.

7.2    In the event of any conflict between the terms of these Terms and Conditions
and the terms of the Operating Procedures, these Terms and Conditions shall prevail.

8.     AMENDMENTS

8.1     The Bank may amend these Terms and Conditions, either generally or in
particular circumstances, from time to time. Any such amendment shall apply with
effect from such time as may be specified by the Bank.

8.2     The Bank may amend the Operating Procedures, either generally or in
particular circumstances, from time to time. Any such amendment shall have effect
from such time as may be specified by the Bank. The Bank may also vary the
operational timetable or vary or omit any of the procedures described on any
particular day.

8.3     Any amendment made pursuant to clauses A.8.1 and A.8.2 shall not take
effect in respect of any Transactions which are outstanding at the time that such
amendments are made, save in respect of changes to Eligible Securities, which shall
have immediate effect. The Bank will endeavour to give reasonable notice of any
amendment, but reserves the right to introduce any amendment with immediate effect,
                                                                        3 August 2007      20

                                                                  Part A: Terms and Conditions



if necessary.

9.     COMMENCEMENT, SUSPENSION AND TERMINATION

9.1    These Terms and Conditions commence on the date notified to the Participant
by the Bank in accordance with the Admission Letter.

9.2     Subject to clause B.10, a Participant may terminate its access to all or any of
the Facilities at any time by giving to the Bank not less than ten Business Days’ prior
notice in writing (such termination becoming effective upon expiry of such notice).

9.3     Without prejudice to the Bank’s rights under clause B.10, the Bank may
suspend for such period as the Bank thinks fit or terminate the Participant’s access to
any of the Facilities at any time at its absolute discretion.

9.4    Any termination under clause A.9.2 or A.9.3 shall not affect any Transaction
which is then outstanding, and the provisions of the Documentation shall continue to
apply to each such Transaction until all the obligations of each Party to the other
under the Documentation and each such Transaction have been fully performed.

9.5     Any suspension or termination in relation to any of the Facilities will have
effect without prejudice to the Participant’s access to any of the other Facilities.

10.    CROSS-DEFAULT AND SET-OFF ON DEFAULT TERMINATION

10.1 If a Default Termination occurs in relation to these Terms and Conditions, the
Bank may at any time by notice to the Participant declare that a Default Termination
shall immediately occur under such Covered Agreements as may be specified in the
notice (each a Designated Agreement). To the extent that any Designated Agreement
does not include provisions to the same effect as a Default Termination or this clause
A.10, the terms of each Designated Agreement are hereby modified so as to
incorporate the provisions set out in this clause.

10.2 The Bank shall determine in accordance with the provisions of the relevant
Designated Agreement the Net Default Amount payable by one Party to the other
under each Designated Agreement.

10.3 If following a Default Termination reciprocal sums are owing between the
parties in respect of:

(a)    the Net Default Amount payable under these Terms and Conditions;
                                                                        3 August 2007      21

                                                                  Part A: Terms and Conditions



(b)    the Net Default Amount payable under any Designated Agreement;

(c)    any amount payable by the Bank in respect of any Deposit; and

(d)    any amount payable by one Party to the other under or in respect of any
       Designated Agreement,

an account shall be taken of the amounts payable by one Party to the other in respect
of such sums and those sums shall be set off against each other; such calculations to
be carried out by the Bank. Only the balance of the account shall be payable by the
Party owing the greater of those sums and such balance shall be due and payable on
the Business Day following the day on which the Bank notifies the Participant of the
amount due. If a Party fails to pay this balance on such Business Day, that Party shall
pay interest on the amount of such balance from the time of default up to the time of
actual payment (as well after as before judgment) at the rate referred to in clause
B.11.2.

11.    CONFIDENTIALITY

11.1 All Confidential Information given by either Party (the Disclosing Party) to
the other Party (the Recipient) relating to the Disclosing Party including, without
limitation, under or in connection with these Terms and Conditions, will be treated by
the Recipient, its directors, officers, employees, agents, sub-contractors, affiliates,
professional advisers and auditors as confidential and will not be used other than for
the purposes of the performance of the Recipient’s obligations under the
Documentation or the Transactions nor disclosed to third parties without the prior
written consent of the Disclosing Party.

11.2 The undertakings in clause A.11.1 above will not apply to Confidential
Information which:

(a)    at the time of supply is in the public domain;

(b)    subsequently comes into the public domain, except through breach of the
       undertakings set out in this clause A.11;

(c)    is already in the lawful possession of the Recipient;

(d)    subsequently comes lawfully into the possession of the Recipient from a third
       party who does not owe the Disclosing Party an obligation of confidence in
       relation to it;
                                                                          3 August 2007      22

                                                                    Part A: Terms and Conditions



(e)    is disclosed in confidence to the Recipient’s professional advisers or auditors
       where such disclosure is considered necessary by the Recipient, acting
       reasonably, and provided that, where reasonably practicable, the Recipient
       making such disclosure has notified the Disclosing Party in advance of the
       proposed form, timing, nature and purpose of the disclosure;

(f)    is disclosed in confidence to a member of the same Group as the Recipient and
       provided that, where reasonably practicable, the Recipient making such
       disclosure has notified the Disclosing Party in advance of the proposed form,
       timing, nature and purpose of the disclosure; or

(g)    is required to be disclosed by law, regulation or any governmental or
       competent regulatory authority, whether in the United Kingdom or elsewhere,
       provided that, where reasonably practicable, the Recipient making such
       disclosure has notified the Disclosing Party in advance of the proposed form,
       timing, nature and purpose of the disclosure.

11.3 Nothing in clause A.11.1 shall preclude the disclosure of information in any
case in which disclosure is made by the Bank or any of its officers or employees:

(a)    to the Financial Services Authority or any other governmental or competent
       regulatory authority, whether in the United Kingdom or elsewhere; or

(b)    for the purposes of any criminal investigation whatever which is being or may
       be carried out or of any criminal proceedings whatever which have been or
       may be initiated, in either case whether in the United Kingdom or elsewhere;

(c)    for the purpose of enabling or assisting the Bank to discharge its functions as a
       monetary authority.

11.4 The Parties agree that damages may not be an adequate remedy for any breach
of this clause A.11 by either Party or any of its directors, officers, employees, agents,
sub-contractors, affiliates, professional advisers or auditors and the Parties shall be
entitled to seek any legal and/or equitable relief, including injunction, in the event of
any breach of the provisions of this clause A.11.

12.    CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

A person who is not a party to the Documentation shall have no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.
                                                                        3 August 2007      23

                                                                  Part A: Terms and Conditions



13.    GOVERNING LAW

13.1 The Documentation and each Transaction shall be governed by and construed
in accordance with English law.

14.    JURISDICTION

14.1 The Bank and the Participant agree that the courts of England are (subject to
clauses A.14.2 and A.14.3 below) to have exclusive jurisdiction to settle any dispute
(including claims for set-off and counterclaims) which may arise in connection with
the Documentation or any Transaction and for such purposes irrevocably submit to
the jurisdiction of the English courts.

14.2 The provision contained in clause A.14.1 above, is included for the benefit of
the Bank. Accordingly, notwithstanding the exclusive agreement in clause A.14.1
above the Bank shall retain the right to bring proceedings in any other court which has
jurisdiction by virtue of Council Regulation EC No. 44/2001 of 22 December 2000
on jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters, the Convention on Jurisdiction and the Enforcement of
Judgments signed on 27 September 1968, or the Convention on Jurisdiction and
Enforcement of Judgments signed on 16 September 1988.

14.3 The Bank may in its absolute discretion take proceedings in the courts of any
other country which may have jurisdiction, to whose jurisdiction the Participant
irrevocably submits.

14.4 The Participant irrevocably waives any objections to the jurisdiction of any
court referred to in this clause A.14.

14.5 The Participant irrevocably agrees that a judgment or order of any court
referred to in this clause A.14 in connection with the Documentation or any
Transaction is conclusive and binding on it and may be enforced against it in the
courts of any other jurisdiction.

15.    AGENT FOR SERVICE OF PROCESS

15.1 If the Participant has no registered office or place of business in England, it
shall appoint and maintain to act as its agent for service of process a person with an
address for service in England and shall notify the Bank of the name and address of
such person. If the agent at any time ceases to act as such, the Participant shall
                                                                         3 August 2007      24

                                                                   Part A: Terms and Conditions



appoint a replacement agent having an address for service in England and shall notify
the Bank of the name and address of the replacement agent. In the absence of such
appointment and notification, the Bank shall be entitled by notice to the Participant to
appoint a replacement agent on the Participant’s behalf and at the Participant’s
expense.
                                                                                 3 August 2007      25

                                               Part B: Terms and Conditions for Repurchase Transactions



                                      PART B

      TERMS AND CONDITIONS FOR REPURCHASE TRANSACTIONS

1.     APPLICATION

1.1     This Part B applies where the Bank has admitted the Participant as an OMO
Participant or a Standing Facilities Participant.

1.2     Where this Part B applies, it applies to all Repurchase Transactions entered
into between the Parties.

2.     INITIATION AND TERMINATION

2.1    A Repurchase Transaction shall be entered into in accordance with the
Operating Procedures.

2.2    The Buyer shall purchase the Purchased Securities from the Seller on the
Purchase Date for the Purchase Price.

2.3   The Seller shall purchase Equivalent Securities from the Buyer on the
Repurchase Date for the Repurchase Price.

2.4     In respect of any Repurchase Transaction in which the Bank is acting as the
Buyer, and without prejudice to clause B.9.1, if on the Purchase Date by the time
specified in the Operating Procedures for delivery of Purchased Securities, the Bank
has received some but not all Purchased Securities due to be delivered to the Bank,
the Bank:

(a)    shall be entitled to purchase all Purchased Securities under the relevant
       Transaction and to require the Participant to deliver all such securities to the
       Bank;

(b)    may elect to purchase only those Purchased Securities that it has received on
       the Purchase Date by the time specified in the Operating Procedures (for the
       appropriate proportion of the agreed Purchase Price) and decline to purchase
       any other Purchased Securities under the relevant Transaction; or

(c)    may decline to purchase any Purchased Securities under the relevant
       Transaction.

2.5    Where the Participant acts as Seller, the Participant shall on the Repurchase
                                                                                3 August 2007      26

                                              Part B: Terms and Conditions for Repurchase Transactions



Date, not later than the time specified for such payment in the Operating Procedures,
pay the Repurchase Price to the Bank in same day funds. Provided that the Bank is
satisfied that it has received the Repurchase Price on the Repurchase Date not later
than the time specified for such payment in the Operating Procedures, the Bank shall
deliver to the Participant Equivalent Securities on the Repurchase Date by such time
as may be specified by the Operating Procedures.

3.     MARGIN MAINTENANCE

3.1     If at any time the Bank has a Net Exposure in respect of the Participant which
is equal to or greater than the Call Trigger Amount, the Bank may by notice to the
Participant require the Participant to deliver to it Margin of an aggregate amount or
value at least equal to that Net Exposure or such less amount as may be specified in
the Operating Procedures.

3.2     If at any time the Participant has a Net Exposure in respect of the Bank which
is equal to or greater than the Return Trigger Amount, the Participant may by notice
to the Bank require the Bank to deliver Margin to it of an aggregate amount or value
at least equal to that Net Exposure or such less amount as may be specified in the
Operating Procedures.

3.3     For the purposes of these Terms and Conditions, a Party has a Net Exposure in
respect of the other Party if the aggregate of all the first Party’s Transaction
Exposures in respect of Relevant Transactions less the amount of any Net Margin
provided to the first Party exceeds the aggregate of all the other Party’s Transaction
Exposures in respect of Relevant Transactions less the amount of any Net Margin
provided to the other Party; and the amount of the Net Exposure is the amount of the
excess. For this purpose any amounts not denominated in sterling shall be converted
into sterling at the Spot Rate prevailing at the relevant time.

3.4     For the purposes of this clause any outstanding sums the payment of which
has been deferred under clause B.4.10, clause B.6.11(g) or clause B.6.12(g) shall be
treated as if they formed part of the Repurchase Price under an outstanding Relevant
Transaction. Such sums shall for the purposes of determining a Party’s Net Exposure
be multiplied by such Margin Ratio as may be prescribed by the Operating
Procedures.

3.5    Notice of any requirement to deliver Margin under this clause shall be given,
and any such Margin shall be delivered, at the time and in the manner provided by,
                                                                                 3 August 2007      27

                                               Part B: Terms and Conditions for Repurchase Transactions



and generally in accordance with, the Operating Procedures.

3.6     Where the Bank has delivered Margin and Equivalent Margin has not
previously been delivered to the Bank in respect of all such Margin, the Participant
shall on the Repurchase Date, not later than the time specified in the Operating
Procedures, deliver Equivalent Margin in respect of such kind or kinds of Margin
previously delivered to it by the Bank (to the extent that Equivalent Margin has not
previously been delivered to the Bank in respect of such Margin) as the Participant
may determine and of amounts such that immediately following such delivery the
Bank will not have a Net Exposure in respect of the Participant which is equal to or
greater than the Call Trigger Amount.

3.7     Where Margin has been delivered to the Bank and Equivalent Margin has not
previously been delivered by the Bank in respect of all such Margin, the Bank shall,
provided that it is satisfied that it has received the Repurchase Price or, where the
Bank is the Seller, the Equivalent Securities due to be delivered by the Participant on
the Repurchase Date and any Equivalent Margin due to be delivered by the
Participant on the Repurchase Date not later than the time specified for such payment
or delivery in the Operating Procedures, deliver Equivalent Margin to the Participant
as follows:

(a)    where at the time the Equivalent Margin is to be delivered by the Bank there is
       no other Repurchase Transaction then outstanding between the Parties, the
       Bank shall deliver Equivalent Margin in respect of all Margin previously
       delivered to it by the Participant (to the extent that Equivalent Margin has not
       previously been delivered to the Participant in respect of such Margin);

(b)    in any other case the Bank shall, subject to any provision to the contrary in the
       Operating Procedures, deliver Equivalent Margin in respect of such amounts
       and kind or kinds of Margin previously delivered to it by the Participant (to
       the extent that Equivalent Margin has not previously been delivered to the
       Participant in respect of such Margin) as the Bank may determine.

3.8    Any delivery by the Bank under clause B.3.7 above shall take place on the
date specified in the Operating Procedures.

3.9    The payment of Cash Margin by the Participant to the Bank shall give rise to a
debt owing from the Bank to the Participant, such debt being repayable in accordance
with these Terms and Conditions.
                                                                                  3 August 2007      28

                                                Part B: Terms and Conditions for Repurchase Transactions



3.10 For the purpose of calculating any Net Exposure in any case where clause
B.7.1 or B.7.2 applies, the Bank or the Participant (as the case may be):

(a)    shall be treated as if on the appropriate balance date, record date or interest
       payment date it had received a payment of Cash Margin equal in value to the
       amount receivable by it (and the sterling value of any amount receivable in
       any other currency shall be calculated daily);

(b)    shall be treated as having repaid such Cash Margin on the date on which it
       makes a payment pursuant to clause B.7.1 or B.7.2 corresponding to the
       amount so receivable.

3.11   This clause applies where:

(a)    the Bank has served notice under clause B.3.1 requiring the Participant to
       deliver Margin and the Participant has not delivered Margin by the time
       required by the Operating Procedures; and

(b)    Eligible Securities are standing to the credit of a securities account or any
       other account or record maintained by the Bank in the name of or otherwise
       sufficient to identify the Participant for the purposes of recording the
       Participant’s right, title and interest in and to Eligible Securities (an Eligible
       Account).

Where this clause applies, without prejudice to clause B.10.1(c), the Participant
irrevocably authorises and instructs the Bank to transfer from an Eligible Account or
Eligible Accounts to the Bank such Eligible Securities as the Bank may select with a
Market Value up to an amount equal to the Net Exposure.

4.     DBV TRANSACTIONS

4.1    Subject to and in accordance with the following provisions of this clause and
the Operating Procedures, the Bank and the Participant may agree to enter into an
overnight sale and repurchase transaction (a DBV Transaction) to be effected through
the “delivery-by-value” facility of CREST.

4.2    The confirmation relating to a DBV Transaction:

(a)    shall specify the Transaction as a DBV Transaction;

(b)    shall not specify the Purchased Securities but shall specify as the DBV class
                                                                                 3 August 2007      29

                                               Part B: Terms and Conditions for Repurchase Transactions



       securities which are eligible for the Bank’s Open Market Operations;

(c)    shall specify as the Purchase Price the consideration to be input in respect of
       the delivery of the Purchased Securities through CREST;

(d)    shall specify the Pricing Rate for that DBV Transaction;

(e)    shall specify, in the case of a Term DBV Repo, the additional securities to be
       delivered by means other than through the DBV facility, or shall identify
       securities already held at the Bank and not required to cover other repos,
       with an adjusted Market Value at least equal to the full amount of interest that
       will be payable at the Maturity Date of that Term DBV Repo. Such securities
       shall be Eligible Securities and shall form part of the Purchased Securities for
       that Term DBV Transaction and shall be delivered or identified and notified to
       the Bank by the Participant in the manner specified in the Operating
       Procedures.

4.3    Subject to clause 4.2(e), the Purchased Securities under a DBV Transaction
shall be such securities as shall be selected and delivered by CREST on the
apportionment of securities to the relevant delivery in accordance with the rules and
procedures of CREST.

4.4    The amount by which the Repurchase Price under a DBV Transaction exceeds
the Purchase Price shall be paid by the Seller to the Buyer on the Repurchase Date.
Such payment shall be made through CREST or outside CREST in same day funds.

4.5    The Bank and the Participant may agree to enter into a series of DBV
Transactions to be confirmed by a single confirmation which specifies the date on
which the last such Transaction is due for Termination (such date being the Maturity
Date), each such DBV Transaction being for the same Purchase Price and each such
DBV Transaction other than the first commencing on the Repurchase Date of the
previous Transaction. Such a series of DBV Transactions is in these Terms and
Conditions referred to as a Term DBV Repo.

4.6    Clauses B.4.1 to B.4.4 shall apply in respect of each DBV Transaction
forming part of a Term DBV Repo, subject to clauses B.4.6 to B.4.10.

4.7    It shall not be necessary for any Transaction forming part of a Term DBV
Repo to be evidenced by a separate confirmation and, subject to clause B.4.8, each
such Transaction shall be deemed to be entered into on the Repurchase Date of the
                                                                                   3 August 2007      30

                                                 Part B: Terms and Conditions for Repurchase Transactions



preceding such Transaction.

4.8    Notwithstanding clause B.4.6, a transaction which would otherwise be deemed
to be entered into on any day and would form part of a Term DBV Repo shall be
deemed not to be entered into if, before the parties have taken the steps necessary to
effect delivery of the Purchased Securities under that transaction on that day in
accordance with the rules and procedures of CREST, an Event of Default has
occurred in respect of the Participant.

4.9    Where clause B.4.8 applies, no further Transaction forming part of the
relevant Term DBV Repo shall arise.

4.10 Subject to clause B.10, and save in so far as the confirmation relating to a
Term DBV Repo may otherwise provide, that part (if any) of the Repurchase Price in
respect of each Transaction in the relevant series (other than the last such Transaction)
which exceeds the Purchase Price shall not be payable on the Repurchase Date, but
shall instead be deferred until, and shall be payable on, the Repurchase Date of the
last Transaction in the series. Such payment shall be made outside CREST in same
day funds.

4.11 If, on the Repurchase Date of a DBV Transaction in which the Bank is the
Buyer, Equivalent Securities are not delivered to the Participant by reason of the fact
that either the Participant’s membership of CREST has been terminated or suspended
or there is insufficient cash standing to the credit of the Participant’s account to enable
payment of the Repurchase Price then, unless before the latest time for delivery of
such Equivalent Securities under the rules and procedures of CREST an Event of
Default has occurred under clause B.10.1 in respect of the Participant, such non-
delivery shall be deemed to constitute a failure by the Participant to pay the
Repurchase Price on the Repurchase Date.

5.     PAYMENTS AND DELIVERIES

5.1    All payments and deliveries of securities under any Transaction shall be made
in the manner specified in the Operating Procedures or in such other manner as may
be agreed between the Parties.

5.2     All right, title and interest in any Purchased Securities, any Equivalent
Securities, any Margin Securities and any Equivalent Margin Securities transferred
under these Terms and Conditions shall pass from one Party to the other on delivery
in accordance with the terms of these Terms and Conditions free from all liens,
                                                                                   3 August 2007      31

                                                 Part B: Terms and Conditions for Repurchase Transactions



claims, charges and encumbrances. The Parties shall execute and deliver all
documents, give all instructions and do all things necessary to ensure that title passes
in accordance with this clause.

5.3     Notwithstanding the use of expressions such as “Repurchase Date”,
“Repurchase Price”, “Margin”, “Net Margin” and “substitution”, which are used to
reflect terminology used in the market in connection with transactions of the kind
provided for in these Terms and Conditions, all right, title and interest in and to
securities and money transferred or paid under these Terms and Conditions shall pass
to the transferee upon transfer or payment, the obligation of the party receiving
Purchased Securities or Margin Securities being an obligation to transfer Equivalent
Securities or Equivalent Margin Securities.

5.4    Time shall be of the essence of these Terms and Conditions.

5.5     Subject to clause B.10, the Bank may and, with the prior approval of the Bank,
the Participant may combine in a single calculation of a net sum payable by one Party
to the other all amounts in the same currency payable by each Party to the other under
any Transaction or otherwise under these Terms and Conditions on the same date and
the obligation to pay that net sum shall be the only obligation of either Party in respect
of those amounts.

5.6     Subject to clause B.10, the Bank may and, with the prior approval of the Bank,
the Participant may combine in a single calculation of a net quantity of securities
transferable by one Party to the other all securities of the same issue, denomination,
currency and series transferable by each Party to the other under any Transaction or
otherwise under these Terms and Conditions on the same date and the obligation to
transfer the net quantity of securities shall be the only obligation of either Party in
respect of the securities so transferable and receivable.

5.7    If:

(a)    in advance of any Repurchase Transaction, the Participant delivers securities
       to the Bank in any Securities Settlement System or in the CCBM System; or

(b)    securities are not delivered to the Participant following Termination of any
       Repurchase Transaction (provided that the Participant shall have paid the
       Repurchase Price); or

(c)    the Bank otherwise holds securities on behalf of the Participant in connection
                                                                                   3 August 2007      32

                                                 Part B: Terms and Conditions for Repurchase Transactions



       with Operations under the Sterling Monetary Framework, whether in an
       Eligible Account or otherwise,

the Bank will hold such securities as agent for the Participant until, as the case may
be, they are returned to the Participant or transferred to the Bank. Such securities will
be held in the name of the Bank or in the name of an agent or nominee to the order of
the Bank and may be held on a fungible basis with other securities for the Bank, the
Participant and other third parties. The Bank shall, with respect to the Participant and
referable to the securities transferred by it, or on its behalf, create and maintain within
its records dedicated accounts, sub-accounts or other entries in the name of, or
otherwise sufficient to identify, the Participant. Such accounts, sub-accounts or other
entries shall be governed by English law. The Participant has a right, on notifying the
Bank, to receive equivalent securities having a value corresponding to the value of the
securities held in accordance with this clause. The Bank reserves the right to levy its
own charges, and to seek reimbursement from the Participant of any charges incurred
by the Bank in respect of any securities held in accordance with this clause. The
Participant hereby agrees to indemnify the Bank and its servants and agents against all
expenses, claims, damages and liabilities whatsoever arising directly or indirectly
from the Bank holding securities as agent for the Participant, and agrees that the Bank
shall have no liability for any expenses, claims, damages and liabilities whatsoever
which the Participant may incur as the result of such securities being held by the
Bank.

6.     SUBSTITUTION

6.1     A Transaction in which the Participant is the Seller may at any time between
the Purchase Date and the Repurchase Date, if the Participant so requests and the
Bank so agrees, be varied by the transfer by the Bank to the Participant of securities
equivalent to the Purchased Securities, or to such of the Purchased Securities as shall
be agreed, in exchange for the transfer by the Participant to the Bank of other Eligible
Securities of such amount and description as shall be agreed (being Eligible Securities
having a Market Value at the date of the variation at least equal to the Market Value
of the Equivalent Securities transferred to the Participant).

6.2     A Transaction shall at any time between the Purchase Date and the
Repurchase Date, if the Bank so requires, be varied by the transfer by the Buyer to the
Seller of securities equivalent to the Purchased Securities, or to such of the Purchased
Securities as the Bank shall specify, in exchange for the transfer by the Seller to the
Buyer of other Eligible Securities of such amount and description as shall be agreed
                                                                                  3 August 2007      33

                                                Part B: Terms and Conditions for Repurchase Transactions



(being Eligible Securities having a Market Value at the date of the variation at least
equal to the Market Value of the Equivalent Securities transferred to the Participant).
In the absence of agreement as to the Eligible Securities to be so transferred to the
Buyer in exchange, the Bank may require the immediate Termination of the
Transaction.

6.3     Any Eligible Securities transferred to the Bank under clause B.6.1 or B.6.2 are
in these Terms and Conditions referred to as New Purchased Securities.

6.4     Any variation or Termination of a Transaction under clause B.6.1 or B.6.2
shall be effected in accordance with the Operating Procedures.

6.5     A Transaction which is varied under clause B.6.1 or B.6.2 shall thereafter
continue in effect as though the Purchased Securities under that Transaction consisted
of or included the New Purchased Securities instead of the securities in respect of
which Equivalent Securities have been delivered to the Bank.

6.6     Where either Party has transferred Margin Securities to the other Party, it may
at any time before Equivalent Margin Securities are transferred to it under clause B.3
request the other Party to transfer Equivalent Margin Securities to it in exchange for
the transfer to the other Party of other Margin Securities having a Market Value at the
time of transfer at least equal to that of such Equivalent Margin Securities. The Bank
may agree or decline to agree to any such request made by the Participant.

6.7     Where the Participant has transferred Margin Securities to the Bank, the Bank
may at any time before it transfers Equivalent Margin Securities to the Participant
under clause B.3 require the Participant, in exchange for the transfer to the Participant
of Equivalent Margin Securities, to transfer to the Bank new Margin Securities
acceptable to the Bank and having a Market Value at the time of transfer at least equal
to that of such Equivalent Margin Securities.

6.8     Subject to clause B.6.9, any exchange effected under clause B6.6 or B.6.7
shall be effected in such manner as may be provided by the Operating Procedures.

6.9     In the case of an exchange effected under clause B.6.1 or an exchange effected
under clause B.6.6 at the request of the Participant, the Bank shall be under no
obligation to perform its own delivery obligation until it is satisfied that it has
received the securities due to be delivered to it by the Participant.

6.10   Subject to and in accordance with clauses B.6.11 and B.6.12:
                                                                                3 August 2007      34

                                              Part B: Terms and Conditions for Repurchase Transactions



(a)   at any time between the Purchase Date and the Repurchase Date of a
      Transaction other than a Term DBV Repo, the Parties may agree to replace
      that Transaction, wholly or as regards such of the Purchased Securities as shall
      be agreed, by a Term DBV Repo;

(b)   at any time between the commencement and the Maturity Date of a Term
      DBV Repo, the Parties may agree to replace that Term DBV Repo, wholly or
      as regards such proportion of that Term DBV Repo as shall be agreed, by a
      Transaction other than a Term DBV Repo.

6.11 Where the Parties agree a replacement such as is referred to in clause
B.6.10(a):

(a)   the Repurchase Date of the Transaction which is to be replaced (the Original
      Transaction) shall occur (or, where the Parties have agreed that the Original
      Transaction is to be replaced with respect to some only of the Purchased
      Securities, shall occur in respect of those Purchased Securities) on such date as
      the Parties agree as the effective date of the replacement (the Effective Date);

(b)   the Purchase Date of the first transaction in the Term DBV Repo by which the
      Original Transaction is wholly or partially replaced (the Replacement Term
      DBV Repo) shall be the Effective Date;

(c)   the Maturity Date of the Replacement Term DBV Repo shall be the original
      Repurchase Date of the Original Transaction;

(d)   the Purchase Price of each Transaction forming part of the Replacement Term
      DBV Repo shall be an amount equal to the Purchase Price of the Original
      Transaction (or, where the Parties have agreed that the Original Transaction is
      to be replaced with respect to some only of the Purchased Securities, an
      amount equal to the Purchase Price of those Purchased Securities);

(e)   the Pricing Rate applicable to each Transaction forming part of the
      Replacement Term DBV Repo shall be the same as that of the Original
      Transaction;

(f)   subject to paragraph (g) below, the Participant shall pay to the Bank the
      Repurchase Price under the Original Transaction (or, where the Parties have
      agreed that the Original Transaction is to be replaced with respect to some
      only of the Purchased Securities, the Repurchase Price in respect of securities
                                                                                 3 August 2007      35

                                               Part B: Terms and Conditions for Repurchase Transactions



      equivalent to those Purchased Securities) on the Effective Date before the
      payment of the Purchase Price under the first Transaction which forms part of
      the Replacement Term DBV Repo;

(g)   that part of the Repurchase Price under the Original Transaction which
      exceeds the Purchase Price (or, where the Parties have agreed that the Original
      Transaction is to be replaced with respect to some only of the Purchased
      Securities, that part of the Repurchase Price in respect of securities equivalent
      to those Purchased Securities which exceeds the Purchase Price of those
      Purchased Securities) shall not be payable on the Effective Date but shall
      instead continue to be payable (subject to clause B.10) on the original
      Repurchase Date of the Original Transaction and shall be paid on that date in
      the manner provided by the Operating Procedures;

(h)   where the Parties have agreed that the Original Transaction is to be replaced as
      respects some only of the Purchased Securities, the Original Transaction shall
      continue in effect as respects the remaining Purchased Securities on the same
      terms in all respects, save that the Purchase Price shall be that part of the
      original Purchase Price as was attributable to those remaining Purchased
      Securities and the Repurchase Price shall be modified accordingly.

6.12 Where the Parties agree a replacement such as is referred to in clause
B.6.10(b):

(a)   the Term DBV Repo which is to be replaced (the Original Term DBV Repo)
      shall be terminated on such date as the Parties agree as the effective date of the
      replacement (the Effective Date) or, where the Parties have agreed that the
      Original Term DBV Repo is to be replaced only as to a specified proportion,
      shall be modified with effect from the Effective Date so that the Purchase
      Price of each Transaction forming part of the Original Term DBV Repo the
      Purchase Date of which falls on or after the Effective Date is reduced by that
      proportion;

(b)   the Purchase Date of the Transaction by which the Original Term DBV Repo
      is to be wholly or partially replaced (the Replacement Transaction) shall be
      the Effective Date;

(c)   the Repurchase Date of the Replacement Transaction shall be the original
      Maturity Date of the Original Term DBV Repo;
                                                                                3 August 2007      36

                                              Part B: Terms and Conditions for Repurchase Transactions



(d)    the Purchase Price of the Replacement Transaction shall be an amount equal to
       the Purchase Price of each Transaction forming part of the Original Term
       DBV Repo or, where the Parties have agreed that the Original Term DBV
       Repo is to be replaced as respects part only of that Purchase Price, an amount
       equal to the remaining part;

(e)    the Pricing Rate of the Replacement Transaction shall be the same as that of
       the Original Term DBV Repo;

(f)    subject to paragraph (g) below, the Participant shall pay to the Bank on the
       Effective Date, before the payment of the Purchase Price under the
       Replacement Transaction, the Repurchase Price under the Transaction forming
       part of the Original Term DBV Repo which terminates on the Effective Date
       (or, where the Parties have agreed that the Original Term DBV Repo is to be
       replaced only as to a specified proportion, that proportion of the Repurchase
       Price);

(g)    subject to clause B.10, that part of the Repurchase Price under the Transaction
       referred to in paragraph (f) above which exceeds the Purchase Price under that
       Transaction and that part of the Repurchase Price of each previous Transaction
       forming part of the Original Term DBV Repo the payment of which has been
       deferred by clause B.4.10 shall continue to be payable on the original Maturity
       Date of the Original Term DBV Repo, notwithstanding the termination or
       partial termination of the Original Term DBV Repo, and shall be paid on that
       date in the manner provided by the Operating Procedures;

(h)    where the Parties have agreed that the Original Term DBV Repo is to be
       replaced only as to a specified proportion, the Original Term DBV Repo shall
       from the Effective Date continue in effect as regards the remaining proportion
       on the same terms in all respects.

7.     INCOME PAYMENTS

7.1     Where the term of any Repurchase Transaction extends over an Income
Payment Date in respect of any Purchased Securities subject to that Repurchase
Transaction, the Buyer shall on the date such Income is paid by the issuer pay to the
Seller an amount equal to the amount paid by the issuer at the time and in the manner
provided by the Operating Procedures.

7.2    Where Margin Securities are transferred from one party (the first party) to the
                                                                                   3 August 2007      37

                                                 Part B: Terms and Conditions for Repurchase Transactions



other party (the second party) and an Income Payment Date in respect of such Margin
Securities occurs before Equivalent Margin Securities are transferred by the second
party to the first party, the second party shall on the date such Income is paid by the
issuer pay to the other Party an amount equal to the amount paid by the issuer at the
time and in the manner provided by the Operating Procedures.

7.3     For the avoidance of doubt, references in clause B.7.1 and clause B.7.2 to the
amount of Income paid by the issuer of any securities shall be to an amount paid
without any withholding or deduction for or on account of taxes or duties
notwithstanding that a payment of such Income made in certain circumstances may be
subject to such a withholding or deduction.

8.     REPRESENTATIONS AND WARRANTIES

8.1     In addition to the representations and warranties made and given in clause A.1
the Participant represents and warrants to the Bank that:

(a)    at the time of sale or transfer to the Bank of any securities or payment or
       transfer to the Bank of any cash it will have the full and unqualified right to
       make such sale, payment or transfer and that upon such sale, payment or
       transfer the Bank will receive the same free and clear of any lien, claim,
       charge or encumbrance; and

(b)    at the time of any purchase by the Participant of any securities it will have the
       full and unqualified right to make such purchase.

8.2     The Bank represents and warrants to the Participant that at the time of sale or
transfer to the Participant of any securities or payment or transfer to the Participant of
any cash it will have the full and unqualified right to make such sale, payment or
transfer and that upon sale, payment or transfer the Participant will receive the same
free and clear of any lien, claim, charge or encumbrance.

9.     EVENTS OF DEFAULT

9.1   For the purposes of these Terms and Conditions, each of the following shall
automatically constitute an Event of Default:

(a)    if the court makes a winding-up order in respect of the Participant under
       Chapter VI of Part IV or Part V of the Insolvency Act 1986;

(b)    if a liquidator is appointed in respect of the Participant or over all or any
                                                                                  3 August 2007      38

                                                Part B: Terms and Conditions for Repurchase Transactions



       material part of the Participant’s property; or

(c)    if any event analogous to any of the foregoing occurs in any jurisdiction in
       relation to the Participant.

9.2     For the purposes of these Terms and Conditions, each of the following shall
constitute an Event of Default if the Bank serves a Default Notice:

(a)    if, where the Participants acts as the Seller, it fails to transfer the Purchased
       Securities to the Bank on the Purchase Date or to pay the Repurchase Price on
       the applicable Repurchase Date in accordance with clause B.2.3;

(b)    if, where the Participant acts as Buyer, it fails to pay the Purchase Price upon
       the applicable Purchase Date or to transfer Equivalent Securities to the Bank
       on the applicable Repurchase Date;

(c)    if the Participant fails to comply with clause B.3.1 or clause B.3.6;

(d)    if the Participant fails to deliver on the due date securities to be purchased by
       the Bank in an Outright Purchase Transaction;

(e)    if any representation or warranty made or deemed to be made or repeated by
       the Participant under these Terms and Conditions or any Transaction was or is
       incorrect in any material respect when made or deemed to be made;

(f)    if the Participant defaults in the due and punctual performance of any other of
       its obligations under these Terms and Conditions or under any Transaction or,
       where applicable, the Guarantor defaults in the due and punctual performance
       of any other of its obligations under the Guarantee and, in either case, (if
       capable of remedy) fails to remedy such default within three full Business
       Days after receipt of notice from the Bank requiring such default to be
       remedied; or

(g)    if the Participant or, where applicable, the Guarantor admits to the Bank its
       inability to, or its intention not to, perform any of its obligations under these
       Terms and Conditions or under any Transaction or under the Guarantee or if
       the Guarantor revokes or otherwise terminates the Guarantee;

(h)    if the Participant has any permission under Part IV of the Financial Services
       and Markets Act 2000 varied or cancelled or authorisation as a credit
       institution (as defined in Council Directive 2000/12/EC and, when it replaces
                                                                                  3 August 2007      39

                                                Part B: Terms and Conditions for Repurchase Transactions



      that directive, Council Directive 2006/48/EC) or investment firm (as defined
      in Council Directive 93/22/EEC, and, when it replaces that directive, Council
      Directive 2004/39/EC) or any licence or authorisation which is required to
      perform any of its obligations under these Terms and Conditions or any
      Transaction suspended or revoked or is suspended or expelled from
      membership of or participation in any payment system, securities exchange or
      association or other self-regulating organisation, or is suspended from dealing
      in securities by any government or regulatory agency or authority, or any of its
      assets or the assets of investors held by it or to its order shall be transferred or
      ordered to be transferred to a trustee, or its powers of management are
      suspended, removed or otherwise divested, by any government or regulatory
      agency or authority;

(i)   if the Participant ceases or threatens to cease to carry on its business or any
      substantial part thereof or compounds, or makes a general assignment for the
      benefit of, or enters into any re-organisation or other special arrangement with,
      its creditors or any class thereof or is deemed unable, or admits in writing its
      inability, to pay its debts within the meaning of section 123(1) of the
      Insolvency Act 1986 or otherwise becomes insolvent;

(j)   if a petition or application is filed or presented or made or any other
      proceeding is commenced in respect of the Participant (other than by the Bank
      in respect of any obligation under these Terms and Conditions) in any court or
      before any agency or out of court or otherwise alleging or for the bankruptcy,
      winding-up or other insolvency of the Participant or seeking any
      reorganisation, arrangement, moratorium, composition, re-adjustment,
      administration, liquidation, dissolution or similar relief under any present or
      future statute, law or regulation, such petition, application or proceeding not
      having been stayed or dismissed within 30 days of its filing or commencement
      (other than a petition, application or proceeding for the winding-up of the
      Participant or the appointment of an administrator, whether out of court or
      otherwise in relation to the Participant or any analogous proceeding in which
      case no such 30 day period shall apply);

(k)   if notice is given of a proposal to appoint, or any step is taken with a view to
      appointing, or there is appointed a receiver or trustee or administrator (whether
      out of court or otherwise) or analogous officer in respect of the Participant or
      over all or any material part of the Participant’s property;
                                                                                3 August 2007      40

                                              Part B: Terms and Conditions for Repurchase Transactions



(l)    if there is convened any meeting of creditors of the Participant for the
       purposes of considering a voluntary arrangement as referred to in section 3 of
       the Insolvency Act 1986;

(m)    if the court makes a winding-up order in respect of any subsidiary or parent
       company of the Participant under Chapter VI of Part IV or Part V of the
       Insolvency Act 1986;

(n)    if a liquidator or an administrator (whether out of court or otherwise) is
       appointed in respect of, where applicable, the Guarantor or parent company of
       the Participant, or over all or any material part of the property of, where
       applicable, the Guarantor or parent company of the Participant;

(o)    if (otherwise than in the case of a members’ voluntary winding up) a liquidator
       or an administrator (whether out of court or otherwise) is appointed in respect
       of any subsidiary of the Participant, or over all or any material part of the
       property, of any subsidiary of the Participant;

(p)    if any event analogous to any of the foregoing occurs in any jurisdiction in
       relation, where applicable, to the Guarantor or to the Participant or any
       subsidiary or parent company of the Participant;

(q)    if the Participant’s membership of CREST or any other Securities Settlement
       System through which securities may be delivered (as specified from time to
       time in the Operating Procedures) is suspended or terminated;

(r)    if the Participant fails to transfer Eligible Credit Support (as defined in the
       ISDA Master Agreement) in accordance with the ISDA Master Agreement; or

(s)    if an event of default or termination event howsoever described occurs under
       the ISDA Master Agreement or any other Covered Agreement.

9.3    If the Participant is a building society within the meaning of the Building
Societies Act 1986, none of:

(a)    an amalgamation of the Participant with another building society under
       Section 93 of that Act; or

(b)    a transfer of the engagements of the Participant to another building society
       under section 94 of that Act; or
                                                                                  3 August 2007      41

                                                Part B: Terms and Conditions for Repurchase Transactions



(c)    a transfer of the whole of the business of the Participant to a successor under
       section 97 of that Act; or

(d)    the dissolution of the Participant under section 93(5), 94(10) or 97(9) or (10)
       of that Act; or

(e)    anything done by the Participant for the purposes of any such amalgamation,
       transfer or dissolution,

shall constitute an Event of Default, or entitle the Bank to serve a Default Notice on
the Participant, under clause B.10.1.

9.4     The Participant shall immediately notify the Bank if an Event of Default, or an
event which, upon the service of a Default Notice, would be an Event of Default,
occurs.

10.   CLOSE-OUT AND LIQUIDATION OF OBLIGATIONS ON THE OCCURRENCE OF AN
EVENT OF DEFAULT

10.1   If an Event of Default occurs in relation to the Participant:

(a)    The Repurchase Date for each Repurchase Transaction hereunder shall be
       deemed immediately to occur and, subject to the following provisions, all
       outstanding sums the payment of which has been deferred under clause
       B.4.10, clause B.6.11(g) or clause B.6.12(g) shall be immediately payable, all
       Cash Margin (including interest accrued) shall be immediately repayable and
       Equivalent Margin Securities shall be immediately deliverable (and so that,
       where this clause applies, performance of the respective obligations of the
       parties with respect to the delivery of securities, the payment of the
       Repurchase Prices for any Equivalent Securities, the payment of any deferred
       sums and the repayment of any Cash Margin shall be effected only in
       accordance with the provisions of this clause B.10.1).

(b)    The Default Market Values of the Equivalent Securities and any Equivalent
       Margin Securities to be transferred, the amount of any Cash Margin (including
       the amount of interest accrued) to be transferred and the Repurchase Prices to
       be paid by the Participant (including any outstanding sums the payment of
       which has been deferred under clause B.4.10, clause B.6.11(g) or clause
       B.6.12(g)) shall be established by the Bank for all Repurchase Transactions as
       at the Repurchase Date.
                                                                                3 August 2007      42

                                              Part B: Terms and Conditions for Repurchase Transactions



(c)   On the basis of the sums so established, an account shall be taken (as at the
      Repurchase Date) of what is due from each party to the other under these
      Terms and Conditions (on the basis that each party’s claim against the other in
      respect of the transfer to it of Equivalent Securities or Equivalent Margin
      Securities under these Terms and Conditions equals the Default Market Value
      thereof) and the sums due from one party shall be set off against the sums due
      from the other and only the balance of the account shall be payable (by the
      party having the claim valued at the lower amount pursuant to the foregoing)
      and such balance shall be due and payable on the next following Business
      Day.

(d)   For the purposes of this calculation, all sums not denominated in sterling shall
      be converted into sterling on the relevant date at the Spot Rate prevailing at
      the relevant time.

(e)   For the purposes of these Terms and Conditions, the Default Market Value of
      any Equivalent Securities or Equivalent Margin Securities shall be determined
      in accordance with paragraph (f) below, and for this purpose:

        (i) the Appropriate Market means, in relation to securities of any
            description, the market which is the most appropriate market for
            securities of that description, as determined by the Bank;

        (ii) the Default Valuation Time means, in relation to an Event of Default,
             the close of business in the Appropriate Market on the fifth dealing day
             after the day on which that Event of Default occurs or, where that
             Event of Default is the occurrence of an event in respect of which
             under clause B.9.1 no notice is required from the Bank in order for
             such event to constitute an Event of Default, the close of business on
             the fifth dealing day after the day on which the Bank first became
             aware of the occurrence of such Event of Default;

       (iii) Deliverable Securities means Equivalent Securities or Equivalent
             Margin Securities to be delivered by the Participant;

       (iv) Net Value means at any time, in relation to any Deliverable Securities
            or Receivable Securities, the amount which, in the reasonable opinion
            of the Bank, represents their fair market value, having regard to such
            pricing sources and methods (which may include, without limitation,
                                                                               3 August 2007      43

                                             Part B: Terms and Conditions for Repurchase Transactions



             available prices for securities with similar maturities, terms and credit
             characteristics as the relevant Equivalent Securities or Equivalent
             Margin Securities) as the Bank considers appropriate, less, in the case
             of Receivable Securities, or plus, in the case of Deliverable Securities,
             all Transaction Costs which would be incurred in connection with the
             purchase or sale of such securities;

        (v) Receivable Securities means Equivalent Securities or Equivalent
            Margin Securities to be delivered to the Participant; and

       (vi) Transaction Costs in relation to any transaction contemplated in
            paragraph (f) or (g) means the reasonable costs, commission, fees and
            expenses (including any mark-up or mark-down) that would be
            incurred in connection with the purchase of Deliverable Securities or
            sale of Receivable Securities, calculated on the assumption that the
            aggregate thereof is the least that could reasonably be expected to be
            paid in order to carry out the transaction.

(f)   If between the occurrence of the relevant Event of Default and the Default
      Valuation Time the Bank gives to the Participant a written notice (a Default
      Valuation Notice) which:

        (i) states that, since the occurrence of the relevant Event of Default, the
            Bank has sold, in the case of Receivable Securities, or purchased, in
            the case of Deliverable Securities, securities which form part of the
            same issue and are of an identical type and description as those
            Equivalent Securities or Equivalent Margin Securities, and that the
            Bank elects to treat as the Default Market Value:

             (A)    in the case of Receivable Securities, the net proceeds of such
                    sale after deducting all reasonable costs, fees and expenses
                    incurred in connection therewith; provided that, where the
                    securities sold are not identical in amount to the Equivalent
                    Securities or Equivalent Margin Securities, the Bank may either
                    (x) elect to treat such net proceeds of sale divided by the
                    amount of securities sold and multiplied by the amount of the
                    Equivalent Securities or Equivalent Margin Securities as the
                    Default Market Value or (y) elect to treat such net proceeds of
                    sale of the Equivalent Securities or Equivalent Margin
                                                                        3 August 2007      44

                                      Part B: Terms and Conditions for Repurchase Transactions



            Securities actually sold as the Default Market Value of that
            proportion of the Equivalent Securities or Equivalent Margin
            Securities, and, in the case of (y), the Default Market Value of
            the balance of the Equivalent Securities or Equivalent Margin
            Securities shall be determined separately in accordance with the
            provisions of this clause B.10.1(f) and accordingly may be the
            subject of a separate notice (or notices) under this clause
            B.10.1(f)(i); or

     (B)    in the case of Deliverable Securities, the aggregate cost of such
            purchase, including all reasonable costs, fees and expenses
            incurred in connection therewith; provided that, where the
            securities purchased are not identical in amount to the
            Equivalent Securities or Equivalent Margin Securities, the
            Bank may either (x) elect to treat such aggregate cost divided
            by the amount of securities purchased and multiplied by the
            amount of the Equivalent Securities or Equivalent Margin
            Securities as the Default Market Value or (y) elect to treat the
            aggregate cost of purchasing the Equivalent Securities or
            Equivalent Margin Securities actually purchased as the Default
            Market Value of that proportion of the Equivalent Securities or
            Equivalent Margin Securities, and, in the case of (y), the
            Default Market Value of the balance of the Equivalent
            Securities or Equivalent Margin Securities shall be determined
            separately in accordance with the provisions of this clause
            B.10.1(f) and accordingly may be the subject of a separate
            notice (or notices) under this clause B.10.1(f)(i);

(ii) states that the Bank has received, in the case of Deliverable Securities,
     offer quotations or, in the case of Receivable Securities, bid quotations
     in respect of securities of the relevant description from two or more
     market makers or regular dealers in the Appropriate Market in a
     commercially reasonable size (as determined by the Bank) and
     specifies:

     (A)    the price or prices quoted by each of them for, in the case of
            Deliverable Securities, the sale by the relevant market marker
            or dealer of such securities or, in the case of Receivable
                                                                                  3 August 2007      45

                                                Part B: Terms and Conditions for Repurchase Transactions



                       Securities, the purchase by the relevant market maker or dealer
                       of such securities;

             (B)       the Transaction Costs which would be incurred in connection
                       with such a transaction; and

             (C)       that the Bank elects to treat the price so quoted (or, where more
                       than one price is so quoted, the arithmetic mean of the prices so
                       quoted), after deducting, in the case of Receivable Securities, or
                       adding, in the case of Deliverable Securities, such Transaction
                       Costs, as the Default Market Value of the relevant Equivalent
                       Securities or Equivalent Margin Securities; or

       (iii) states:

             (A)       that either (x) acting in good faith, the Bank has endeavoured
                       but been unable to sell or purchase securities in accordance
                       with paragraph (i)(A) or (i)(B) above or to obtain quotations in
                       accordance with paragraph (ii) above (or both) or (y) the Bank
                       has determined that it would not be commercially reasonable to
                       obtain such quotations, or that it would not be commercially
                       reasonable to use any quotations which it has obtained under
                       paragraph (ii) above; and

             (B)       that the Bank has determined the Net Value of the relevant
                       Equivalent Securities or Equivalent Margin Securities (which
                       shall be specified) and that the Bank elects to treat such Net
                       Value as the Default Market Value of the relevant Equivalent
                       Securities or Equivalent Margin Securities,

      then the Default Market Value of the relevant Equivalent Securities or
      Equivalent Margin Securities shall be an amount equal to the Default Market
      Value specified in accordance with (i), (ii)(C) or, as the case may be, (iii)(B)
      above.

(g)   If by the Default Valuation Time the Bank has not given a Default Valuation
      Notice, the Default Market Value of the relevant Equivalent Securities or
      Equivalent Margin Securities shall be an amount equal to their Net Value at
      the Default Valuation Time; provided that, if at the Default Valuation Time
      the Bank reasonably determines that, owing to circumstances affecting the
                                                                                  3 August 2007      46

                                                Part B: Terms and Conditions for Repurchase Transactions



       market in the Equivalent Securities or Equivalent Margin Securities in
       question, it is not possible for the Bank to determine a Net Value of such
       Equivalent Securities or Equivalent Margin Securities which is commercially
       reasonable, the Default Market Value of such Equivalent Securities or
       Equivalent Margin Securities shall be an amount equal to their Net Value as
       determined by the Bank as soon as reasonably practicable after the Default
       Valuation Time.

(h)    The Participant shall be liable to the Bank for the amount of all reasonable
       legal and other professional expenses incurred by the Bank in connection with
       or as a consequence of an Event of Default, together with interest thereon at
       the rate specified in clause B.11.

11.    DEFAULT INTEREST

11.1 If a Party fails to pay the balance referred to in clause B.10.1(c) or clause
A.10.3 in accordance with that clause, that Party shall pay interest on the amount of
such balance from the time of default up to the time of actual payment (as well after
as before judgment) at the rate referred to in clause B.11.2.

11.2   The rate applicable for the purposes of this clause B.11 shall be:

(a)    where the amount is payable by the Participant to the Bank, the Pricing Rate
       applicable to Standing Facility Repurchase Transactions on the date of
       payment; and

(b)    where the amount is payable by the Bank to the Participant, the rate payable
       by the Bank in respect of Standing Facility Deposits on the date of payment.

11.3 Interest under this clause B.11 shall accrue daily on the basis of a year of 365
days from and including the first day to the last day of each period of one month
beginning from the day on which the balance under clause B.10.1(c) or, as the case
may be, clause A.10.3 was due and shall be due and payable at the end of each such
period. So long as the default continues, the rate referred to in clause B.11.2 shall be
calculated on a similar basis at the end of each such period and interest payable under
this clause B.11.3 which is unpaid at the end of each such period shall thereafter itself
bear interest at the rates provided in this clause B.11.
                                                                           3 August 2007       47

                                                         Part C: Terms and Conditions for Deposits



                                      PART C

                  TERMS AND CONDITIONS FOR DEPOSITS

1.     APPLICATION

1.1     Subject to clause C.1.2, this Part C applies to all Standing Facility Deposit
Transactions and deposits made under the Reserve Account Facility by the
Participant.

1.2     If the Participant is a CHAPS or CREST sterling settlement bank or otherwise
than in its capacity as a Reserve Account Participant has an RTGS account with the
Bank, any deposit made under the Reserve Account Facility shall be credited to the
Participant’s RTGS account and governed by the RTGS mandate agreement or other
agreement in relation to the operation of such account between the Bank and the
Participant. Such deposit shall not be a Deposit for the purposes of these Terms and
Conditions but shall be subject to the provisions of the Operating Procedures.

2.     DEPOSITS

2.1     The Participant may make a Deposit at such times, in such manner and on
such terms as may be prescribed in the Operating Procedures from time to time.

2.2     Where an Event of Default or an event which, upon the service of a Default
Notice, would be an Event of Default has occurred and is continuing the Bank may, at
its absolute discretion, refuse to accept any Deposit.

3.     REPAYMENT OF DEPOSITS

3.1    Subject to clauses C.3.2 and C.3.3, a Deposit shall be repayable at such times
and in such manner as may be prescribed in the Operating Procedures from time to
time.

3.2     Except where the Bank has declared the Deposit repayable in accordance with
clause C.3.3, the obligation of the Bank to repay any Deposit or to pay any interest in
respect of any Deposit or any part thereof shall be subject to the condition precedent
that no Event of Default or an event which, upon the service of a Default Notice,
would be an Event of Default shall have occurred and be continuing.

3.3   Upon the occurrence of an Event of Default in relation to the Participant the
Bank may by notice to the Participant declare the Deposit to be repayable; provided
                                                                             3 August 2007       48

                                                           Part C: Terms and Conditions for Deposits



that where clause A.10.3 applies, the Deposit shall be repayable only in accordance
with that clause.

4.     INTEREST

4.1     If at close of business on any Business Day, the balance of the Participant’s
standing facility deposit or reserve account is greater than zero, it shall bear interest
payable at such rate or rates (if any), in such manner and at such times as may be
specified in the Operating Procedures from time to time.

5.     SUSPENSION AND VARIATION

5.1    The Bank may in its absolute discretion suspend or vary the terms of the
standing facility deposits or the reserve accounts at any time by amending the
Operating Procedures in accordance with clause A.8.2.

6.     REPRESENTATIONS AND WARRANTIES

6.1     In addition to the representations and warranties made in clause A.1, the
Participant represents and warrants to the Bank that all sums deposited by the
Participant with the Bank shall be free and clear at all times of any lien, claim, charge
or encumbrance.
                                                                            3 August 2007       49

                                                          Part D: Terms and Conditions for Deposits



                                       PART D

          TERMS AND CONDITIONS FOR OUTRIGHT PURCHASE
                        TRANSACTIONS

1.     APPLICATION

1.1     This Part D applies where the Bank has admitted the Participant as an OMO
Participant.

1.2    Where this Part D applies, it applies to all Outright Purchase Transactions
entered into between the Parties. Swap Transactions shall be governed by the ISDA
Master Agreement and the Documentation.

2.     INITIATION AND SETTLEMENT

2.1     An Outright Purchase Transaction shall be entered into, and settlement shall
be effected, in accordance with the Operating Procedures.

3.     REPRESENTATIONS AND WARRANTIES

3.1     In addition to the representations and warranties made in clause A.1, the
Participant represents and warrants to the Bank that at the time of sale and transfer to
the Bank of any securities in connection with an Outright Purchase Transaction it will
have the full and unqualified right to make such sale and that upon such sale the Bank
will receive the same free and clear of any lien, claim, charge or encumbrance.
                                                                        3 August 2007   50




                                       PART E

                                    GLOSSARY

1.     In these Terms and Conditions, the following words and expressions shall
have the following meanings:

Admission Letter means the letter from the Bank signed by the Participant by which
the Participant is admitted as a Participant in the Bank’s Operations under the Sterling
Monetary Framework;

Bank means the Governor and Company of the Bank of England;

Business Day means a day (other than a Saturday or a Sunday) on which banks are
open for business in London;

Buyer means, with respect to any Repurchase Transaction, the Party who agrees to
buy from the other Party Eligible Securities on the Purchase Date;

Call Trigger Amount means the amount for the time being prescribed by the
Operating Procedures as the call trigger amount for the purposes of clause B.3.1;

Cash Margin means a payment or deemed payment of cash from the Participant to
the Bank by way of margin under clause B.3;

CCBM System means the system where a central bank in another country has agreed
to act as the Bank’s custodian under the Correspondent Central Banking Model;

Confidential Information means all information relating to the Participant’s
participation in Operations under the Sterling Monetary Framework, any Transactions
and all other information whether conveyed orally, in writing or otherwise which is
confidential in nature;

Covered Agreement means any agreement, deposit made by the Participant with the
Bank, payment arrangement or obligation (other than these Terms and Conditions or a
Transaction) between the Bank and the Participant;

CREST means the computer-based system and associated clerical procedures
operated by Euroclear UK & Ireland Limited to facilitate the transfer of gilt-edged
securities and other uncertificated securities or any other system which may replace
                                                                      3 August 2007   51




that system;

DBV Transaction has the meaning given in clause B.4.1;

Default Market Value has the meaning given in clause B.10.1(e);

Default Notice means a written notice served by the Bank on the Participant under
clause B.9.1 stating that an event shall be treated as an Event of Default for the
purposes of these Terms and Conditions;

Default Termination means, in respect of these Terms and Conditions or a
Designated Agreement, the termination of all outstanding transactions or acceleration
of all outstanding deposits following the occurrence of an Event of Default or an
event of default howsoever described under that Designated Agreement;

Deposit means a Liquidity Withdrawal Deposit Transaction, a Standing Facility
Deposit Transaction or a Reserve Account Transaction and shall, where relevant,
include any interest accrued thereon;

Designated Agreement has the meaning given in clause A.10.1;

Designated Telephone Link means the telephone line or number designated by the
Bank with the agreement of the Participant as the line or number through which
communications with respect to the Participant relating to Transactions and other
matters arising under or in respect of these Terms and Conditions may be given to the
Bank;

Documentation means these Terms and Conditions, the Operating Procedures, the
Eligibility Criteria and the Admission Letter each as supplemented or amended from
time to time;

Electronic Tendering System means the Bank’s electronic trading platform which is
made available to Participants and through which the Bank conducts Open Market
Operations;

Electronic Tendering System User Guide means the external users’ guide for the
Electronic Tendering System published by the Bank and available at
www.bankofengland.co.uk/markets/money/omo/outright_purchases.htm;

Eligibility Criteria means the criteria specified by the Bank for participation in the
                                                                          3 August 2007   52




Bank’s Operations under the Sterling Monetary Framework;

Eligible Debt Securities has the meaning given in the Uncertificated Securities
Regulations 2001;

Eligible Securities means securities specified in the Operating Procedures, or
otherwise specified by the Bank, as being eligible for purchase by the Bank and for
delivery as Margin Securities pursuant to these Terms and Conditions and for the
delivery as Eligible Credit Support (as defined in the ISDA Master Agreement) under
the ISDA Master Agreement;

Equivalent Margin means, in relation to any Margin provided by one Party to the
other, an amount in cash equal to any Cash Margin or Equivalent Margin Securities in
respect of any Margin Securities, or a combination of the two;

Equivalent Margin Securities means securities equivalent to securities previously
transferred as Margin Securities;

Equivalent Securities means securities equivalent to the Purchased Securities under a
Transaction and for this purpose securities are equivalent to other securities if they are
(i) of the same issuer, (ii) part of the same issue and (iii) of an identical type, nominal
value, description and (except where otherwise stated) amount as those other
securities. Securities will be equivalent to other securities notwithstanding that those
securities have been redenominated into euros or the nominal value of the securities
has changed in connection with such redenomination;

Event of Default has the meaning given in clause B.9;

Facility means the Bank’s Open Market Operations, Standing Facilities or Reserve
Account Facility;

Group means a group as defined in section 421 of the Financial Services and Markets
Act 2000;

Guarantee means a guarantee provided by the primary entity of the Participant’s
Group accordance with clause 1(b) of the Eligibility Criteria;

Guarantor means, with respect to a Participant, the primary entity of the Participant’s
Group which is required to provide a guarantee in accordance with clause 1(b) of the
Eligibility Criteria;
                                                                         3 August 2007   53




Income means, with respect to any Eligible Securities at any time, any interest
payment, dividend or other distribution on such Eligible Securities (but excluding
distributions which are a payment or repayment of capital in respect of such Eligible
Securities);

Income Payment Date means, with respect to any Eligible Securities, the balance date
or record date (in the case of registered securities) or the payment date (in the case of
bearer securities) in respect of such Eligible Securities;

ISDA Master Agreement means the Bank’s pro forma 1992 ISDA Master Agreement
including the Credit Support Annex entered into between the Bank and a Participant
which governs Swap Transactions and other transactions;

Liquidity Withdrawal Deposit Transaction means a deposit made with the Bank in
the course of the Open Market Operations, as more particularly described in the
Operating Procedures;

Liquidity Withdrawal Repurchase Transaction means a repurchase transaction
entered into in the course of the Open Market Operations, as more particularly
described in the Operating Procedures;

Margin means Cash Margin or Margin Securities or a combination of the two;

Margin Ratio means, in relation to Purchased Securities, or securities equivalent to
Purchased Securities, of any description, the ratio for the time being prescribed by the
Operating Procedures as the ratio which the Market Value, at the time when the
relevant Repurchase Transaction is entered into, of Purchased Securities of that
description must bear to the Purchase Price of such Purchased Securities (and so that
different Margin Ratios may be so prescribed in respect of securities of different
descriptions);

Margin Securities means Eligible Securities delivered by one Party to the other by
way of Margin;

Market Value means, in relation to an amount of cash in sterling, its nominal amount
or, in relation to Purchased Securities, Equivalent Securities, Margin Securities or
Equivalent Margin Securities, the market value of such securities determined in
accordance with paragraphs (a) to (c).
                                                                           3 August 2007   54




(a)    Subject to (b) below, with respect to any Purchased Securities, Equivalent
       Securities, Margin Securities or Equivalent Margin Securities means, as at any
       date:

         (i)    in relation to securities of a type capable of being held in CREST, the
                CREST reference price for such securities on that date determined in
                accordance with the Operating Procedures;

         (ii)   in relation to securities not falling within (i) above, the market value of
                such securities determined in accordance with the Operating
                Procedures.

(b)    The Participant and the Bank may agree in relation to any Repurchase
       Transaction or to these Terms and Conditions generally to adopt a different
       basis for determining the Market Value of Purchased Securities, Equivalent
       Securities, Margin Securities or Equivalent Margin Securities from that set out
       in paragraph (a) above.

(c)    The Market Value of any Purchased Securities, Equivalent Securities, Margin
       Securities or Equivalent Margin Securities shall be stated in sterling; and any
       amounts which would otherwise be expressed in another currency shall for this
       purpose be converted into sterling, and currency conversions for the purposes
       of clause B.3.10 shall be effected, at such time as is specified in the Operating
       Procedures;

Maturity Date has the meaning given in clause B.4.5;

Net Default Amount means the net amount payable by one Party to the other upon a
Default Termination;

Net Exposure has the meaning given in clause B.3.3;

Net Margin means, with respect to a Party, the excess (if any) of (i) the sum of the
amount of Cash Margin paid to that Party and the Market Value of Margin Securities
transferred to that Party under clause B.3.1 or B.3.2 (excluding any Cash Margin
which has been repaid to the other Party and any Margin Securities in respect of
which Equivalent Margin Securities have been transferred to the other Party) over (ii)
the sum of the amount of Cash Margin paid to the other Party and the Market Value of
Margin Securities transferred to the other Party under clause B.3.1 or B.3.2 (excluding
                                                                        3 August 2007   55




any Cash Margin which has been repaid by the other Party and any Margin Securities
in respect of which Equivalent Margin Securities have been transferred by the other
Party) and for this purpose any amounts not denominated in sterling shall be
converted into sterling at the Spot Rate prevailing at the relevant time;

OMO Participant means a Participant which is admitted as a participant in the Open
Market Operations;

Open Market Operations means the Bank’s open market operations as described in
the Operating Procedures;

Open Market Repurchase Transaction means a repurchase transaction entered into
between the Bank and the Participant in the course of the Open Market Operations, as
more particularly described in the Operating Procedures;

Operating Procedures means the procedures published by the Bank relating to the
Bank’s Operations under the Sterling Monetary Framework;

Operations under the Sterling Monetary Framework means the Open Market
Operations, the Standing Facilities and the Reserve Account Facility;

Outright Purchase Transaction means a transaction in which the Bank purchases
Eligible Securities from a Participant in the course of the Open Market Operations, as
more particularly described in the Operating Procedures;

Participant means the institution identified as such in the Admission Letter;

Party means the Bank or the Participant;

Price Differential means, with respect to any Repurchase Transaction as at any date,
the aggregate amount obtained by the daily application of the Pricing Rate for such
Repurchase Transaction to the Purchase Price for such Transaction for the actual
number of days elapsed during the period from (and including) the Purchase Date to
(but excluding) the date as at which the calculation is made on the basis of a 365 day
year;

Pricing Rate means, with respect to any Repurchase Transaction, the per annum
percentage rate for calculation of the Price Differential applicable to that Repurchase
Transaction as published by the Bank before entry into that Repurchase Transaction;
                                                                      3 August 2007   56




Purchase Date means a Business Day on which the Seller agrees to sell and the Buyer
agrees to purchase any Purchased Securities;

Purchase Price means, with respect to any Repurchase Transaction, the amount
agreed to be paid by the Buyer as consideration for the purchase of the Purchased
Securities;

Purchased Securities means the Eligible Securities purchased or to be purchased by
the Buyer pursuant to a Repurchase Transaction;

Relevant Transaction means any Repurchase Transaction other than a Repurchase
Transaction of a description for the time being specified by the Operating Procedures
as a Repurchase Transaction which is to be left out of account for the purposes of the
margin maintenance provisions of clause B.3;

Repurchase Date means a Business Day on which the Buyer agrees to sell and the
Seller agrees to purchase any Equivalent Securities (being a Business Day specified in
the relevant confirmation);

Repurchase Price means, with respect to any Repurchase Transaction as at any date,
the sum of the Purchase Price and the Price Differential as at that date;

Repurchase Transaction means an Open Market Repurchase Transaction, a Liquidity
Withdrawal Repurchase Transaction or a Standing Facility Repurchase Transaction;

Reserve Account Facility means the Bank’s reserve account facility as described in
the Operating Procedures;

Reserve Account Participant means a Participant who is admitted as a participant in
the Reserve Account Facility;

Reserve Account Transaction means a deposit made with the Bank in the course of
the Reserve Account Facility, as more particularly described in the Operating
Procedures;

Return Trigger Amount means the amount for the time being prescribed by the
Operating Procedures as the return trigger amount for the purposes of clause B.3.2;

Securities Settlement System means each of CREST, the settlement system of
Clearstream Banking, société anonyme, Luxembourg, the Euroclear settlement system
                                                                      3 August 2007   57




operated by Euroclear Bank S.A./N.V. and any other securities settlement system as
may be specified in the Operating Procedures from time to time;

Seller means, with respect to any Repurchase Transaction, the Party who agrees to
sell to the other Party Eligible Securities on the Purchase Date;

Spot Rate means, where an amount in a currency other than sterling is to be converted
into sterling at any time, the rate of exchange published by the Bank as specified in
the Operating Procedures;

Standing Facilities means the Bank’s standing facilities as described in the Operating
Procedures;

Standing Facility Deposit Transaction means a deposit made with the Bank in the
course of the Standing Facilities, as more particularly described in the Operating
Procedures;

Standing Facilities Participant means a Participant who is admitted as a participant
in the Standing Facilities;

Standing Facility Repurchase Transaction means a repurchase transaction entered
into between the Bank and the Participant in the course of the Standing Facilities, as
more particularly described in the Operating Procedures;

Swap Transaction means a swap transaction entered into between the Bank and a
Participant and governed by the ISDA Master Agreement and the Documentation;

SWIFT Equipment means equipment and software used by the Participant for the
purposes of sending and receiving SWIFT messages;

SWIFT Keys means the secret cryptographic information which controls the operation
of the SWIFT cryptographic algorithms, used by SWIFT Equipment for sending and
receiving SWIFT messages;

Term DBV Repo has the meaning given in clause B.4.5;

Termination means, with respect to any Repurchase Transaction, the sale by the
Buyer to the Seller of Equivalent Securities for the Repurchase Price;

Terms and Conditions means the Terms and Conditions for participation in the Bank
                                                                          3 August 2007   58




of England’s Operations under the Sterling Monetary Framework;

Transaction means any or all of a Deposit, a Repurchase Transaction or an Outright
Purchase Transaction;

Transaction Exposure, with respect to any Repurchase Transaction at any time
during the period from the Purchase Date to the Repurchase Date (or, if later, the date
on which Equivalent Securities are delivered to Seller), the difference between (i) the
Repurchase Price at the Maturity Date (and, where the Repurchase Transaction relates
to securities of more than one description to which different Margin Ratios apply, the
Repurchase Price shall be attributed to Equivalent Securities of each such description
in the same proportions as those in which the Purchase Price was apportioned among
the Purchased Securities) and (ii) the Market Value of Equivalent Securities at such
time divided by the applicable Margin Ratio. If (i) is greater than (ii), Buyer has a
Transaction Exposure for that Repurchase Transaction equal to that excess. If (ii) is
greater than (i), Seller has a Transaction Exposure for that Repurchase Transaction
equal to that excess.

2.     In these Terms and Conditions any reference to:

(a) an enactment or statutory provision or a Council Directive or Regulation or
international convention or any other legislative provision is a reference to it as it may
have been, or may from time to time be, amended, modified, replaced, extended,
consolidated or re-enacted;

(b) numbered clauses preceded by a letter are to clauses of these Terms and
Conditions in the relevant part of these Terms and Conditions;

(c) the Documentation or any Covered Agreement is a reference to it as it may from
time to time be amended or replaced; and

(d) time is to London time.
                                                                                                                    3 August 2007            59


THE BANK OF ENGLAND’S OPERATIONS UNDER THE STERLING
MONETARY FRAMEWORK: OPERATING PROCEDURES

1     INTRODUCTION .............................................................................................................. 61
2     PARTICIPANTS................................................................................................................ 64
    2.1       Eligibility..................................................................................................................... 64
    2.2       Communication .......................................................................................................... 64
3         RESERVE ACCOUNT FACILITY.................................................................................... 67
    3.1       Maintenance periods.................................................................................................. 67
    3.2       Accounts .................................................................................................................... 68
    3.3       Reserve targets.......................................................................................................... 70
    3.4       Remuneration and charges........................................................................................ 71
    3.5       Excess reserves......................................................................................................... 73
    3.6       Contingencies ............................................................................................................ 73
4     OPEN MARKET OPERATIONS - REPURCHASE TRANSACTIONS .............................. 76
    4.1       Weekly Short-term Repo Open Market Operations.................................................... 76
    4.2       Fine-tuning operations ............................................................................................... 80
    4.3       Long-term Repo Open Market Operations................................................................. 82
    4.4       Delivery of repo securities to the Bank....................................................................... 86
    4.5       Margin Calls for repos................................................................................................ 90
    4.6       Dividends ................................................................................................................... 91
    4.7       Substitutions .............................................................................................................. 92
    4.8       Repurchase of securities ........................................................................................... 94
    4.9       Contingencies ............................................................................................................ 97
5          OPEN MARKET OPERATIONS – OUTRIGHT PURCHASES .................................... 100
    5.1       Introduction .............................................................................................................. 100
    5.2       Amounts to be purchased, rates and maturities....................................................... 101
    5.3       Publication ............................................................................................................... 101
    5.4       Outright purchases and delivery of gilts ................................................................... 102
    5.5       Outright purchases and delivery of swapped foreign currency bonds...................... 105
    5.6       Swap exposures and ISDA collateral....................................................................... 112
    5.7       Contingencies .......................................................................................................... 115
6     STANDING FACILITIES................................................................................................. 117
    6.1       Rates ....................................................................................................................... 117
                                                                                                               3 August 2007            60

    6.2     Deadlines and procedures ....................................................................................... 117
    6.3     Delivery of securities in the standing lending facility ................................................ 119
    6.4     Payment of funds in the standing lending facility ..................................................... 121
    6.5     Maturity/ repurchase of securities ............................................................................ 121
    6.6     Contingencies .......................................................................................................... 121
7      COLLATERAL................................................................................................................ 123
    7.1     General .................................................................................................................... 123
    7.2     Eligible Securities..................................................................................................... 123
    7.3     Definitions ................................................................................................................ 123
    7.4     Specific requirements for collateral .......................................................................... 125
    7.5     Additional requirements ........................................................................................... 126
    7.6     Concentration limit ................................................................................................... 126
    7.7     Contingencies .......................................................................................................... 128
    7.8     Valuation of collateral............................................................................................... 128
    7.9     Repo Margins and Haircuts on ISDA collateral ........................................................ 129
    7.10    Liability for charges .................................................................................................. 133
8          USE OF US TREASURY SECURITIES AS COLLATERAL IN EXCEPTIONAL
CIRCUMSTANCES ................................................................................................................ 134
APPENDICES ........................................................................................................................ 137
    Appendix I: Summary of interest rates on the Bank’s facilities ........................................... 137
    Appendix II: Table of scheduled announcements for Bank of England sterling operations 138
    Appendix III: Summary daily timetable................................................................................ 141
    Appendix IV (a): Bank of England wire service pages for Sterling Monetary Framework ... 143
    Appendix IV (b): Examples of Bank of England screen announcements ............................ 144
    Appendix V: Valuation methods, haircuts and margins for collateral .................................. 152
    Appendix VII (a) - (d): Transaction forms for sterling and non-sterling collateral ................ 156
    Appendix VIII: Liquidity withdrawal fine-tuning form ........................................................... 160
    Appendix IX: Standing deposit facility form......................................................................... 161
    Appendix X (a) & (b): Margin transfer forms (OMO repo) ................................................... 162
    Appendix XI (a) & (b): Substitution request forms (OMO repo)........................................... 164
    Appendix XII (a) - (d): Maturity forms for sterling and non-sterling collateral ...................... 166
    Appendix XIII (a) & (b): Forms for use with US Treasury securities.................................... 170
    Appendix XIV – Parameters set in the Btender system ...................................................... 172
    Appendix XV - Screen Prints from Btender......................................................................... 173
                                                                                        3 August 2007       61


1       INTRODUCTION

(i)     These Operating Procedures set out terms which govern participation in the Bank’s Sterling
        Monetary Framework (the Reserve Account Facility, Open Market Operations and Standing
        Facilities) and explain the procedures involved. Unless expressly stated in the Documentation or
        otherwise agreed with the Bank, they do not apply to existing or new Global Master Repurchase
        Agreements. These Operating Procedures should be read in conjunction with the Terms and
        Conditions for participation in the Bank of England’s Sterling Monetary Framework (the ‘Terms
        and Conditions’) which form part of this Documentation, and by which all transactions referred
        to in these Operating Procedures are governed. In the event of any conflict between the two
        documents, the Terms and Conditions prevail. In the case of Open Market Operations (‘OMOs’)
        which include swap transactions, the Documentation should also be read in conjunction with the
        ISDA Master Agreement signed by the Participant. In the event of any conflict between the ISDA
        Master Agreement and the Operating Procedures the former will prevail, unless specified
        otherwise in the ISDA Master Agreement.


(ii)    In some cases these Operating Procedures follow market terminology in using expressions such
        as ‘lending’, ‘repurchase’, ‘repo’, ‘redelivery’, ‘margin’ and ‘substitution’. This is done for the
        sake of familiarity, but is not a reflection of the legal nature of the transactions undertaken under
        these Operating Procedures, which is determined by the Terms and Conditions and, where
        relevant, the ISDA Master Agreement.


(iii)   Full title to securities sold under sale and repurchase transactions and to securities transferred by
        way of Margin passes to the recipient; the right of the party making the transfer is a right to
        receive Equivalent Securities (see Glossary in Part E of the Terms and Conditions) in accordance
        with the Terms and Conditions and these Operating Procedures.


(iv)    Full title to securities transferred as ISDA collateral passes to the recipient; the right of the party
        making the transfer is a right to receive equivalent collateral in accordance with the terms of the
        ISDA Master Agreement and these Operating Procedures.


(v)     The Bank may amend these Operating Procedures generally or in particular circumstances from
        time to time, any such amendment taking effect at a time specified by the Bank. Copies of the
        Documentation as amended, or the relevant amended parts, will be circulated to Participants in
                                                                                       3 August 2007      62

          the Bank’s Sterling Monetary Framework and the full amended Documentation will be published
          in the Markets section of the Bank’s website
          www.bankofengland.co.uk/markets/money/documentation/index.htm. The Bank will endeavour
          to give reasonable notice of any amendment, but reserves the right to introduce any amendment
          with immediate effect. The Bank may also vary the operational timetable or vary or omit any of
          the procedures described on any particular day.


(iv)      The timetable for the Bank’s OMOs is published annually at
          www.bankofengland.co.uk/markets/money/documentation/index.htm.


(v)       All transactions or planned transactions by individual Participants as part of the Bank’s Sterling
          Monetary Framework are confidential (see Terms and Conditions, clause A.11).


(vi)      Frequent reference is made in this document to Liquidity Services (LS) and Settlement and
          Custodial Services (SCS) at the Bank of England. LS provides settlement services for short- and
          long-term repos and Standing Facilities. SCS provides settlement services for outright purchases
          (bonds and swapped foreign currency bonds) and manages the ISDA collateral process. After
          any Open Market Operation bids or offers have been submitted to the Bank’s dealing desk, these
          offices will be the usual point of contact for Participants on settlement and collateral management
          issues.


(vii)     All references to times are London time, unless stated otherwise.


(viii) References in these Operating Procedures to Clearstream should be taken to refer to the
          settlement system of Clearstream Banking SA, Luxembourg. References to Euroclear should be
          taken to refer to the Euroclear settlement system operated by Euroclear Bank SA/NV. References
          to CREST should be taken to refer to the CREST settlement system operated by Euroclear UK &
          Ireland Limited.


(ix)      Reference is made in these Operating Procedures to ‘dividends’1 being payable during the life of
          a bond; this word is used for the sake of familiarity and has the same meaning as ‘income
          payments’ as used in the Terms and Conditions, or ‘coupons’.

1
    Dividends are referred to as ‘distributions’ in the ISDA Master Agreement.
                                                                                3 August 2007     63

(x)   All capitalised terms in these Operating Procedures have the meaning defined in the Glossary in
      Part E of the Terms and Conditions, or in the ISDA Master Agreement.
                                                                                                      3 August 2007          64

2          PARTICIPANTS


2.1        Eligibility

(i)        Reserve Account Participants, Standing Facilities Participants and Open Market Operations
           (OMO) Participants must conform to the Eligibility Criteria set out in this Documentation, in the
           section entitled ‘Eligibility Criteria for Participation in the Bank of England’s Sterling Monetary
           Framework’.


2.2        Communication

(i)        Communication to support transactions with the Bank takes place via the Bank of England’s
           Electronic Tendering System for Open Market Operations, (‘Btender’), and by telephone.
           Telephone numbers, including for front and back offices and the Bank’s contingency site, are
           provided to Participants in a separate document.


(ii)       The Bank conducts OMOs via the Btender system, including short-term repos, fine tune
           operations, long-term repos, and outright purchases of bonds2.


(iii)      In the event that Btender is unavailable prior to the scheduled start of the OMO, short-term repo
           and fine tune operations will be conducted via telephone. It is therefore a requirement that OMO
           Participants’ front offices have a dedicated telephone line. See sections 4.9 and 5.7 for further
           information on contingencies for repo and outright purchases respectively.


(iv)       The start and end times for each OMO are detailed in the relevant sections of the Documentation
           and set out in the Btender system and available for information in wire services announcements
           (see Appendix IV). Bids and offers must be received by the Bank prior to the close time for the
           operation. The time stamp applied to any bid in accordance with the Operating Procedures is
           final and binding (see Terms and Conditions). Participants should take account of the fact that it
           may take some seconds for bids and offers to be received at the Bank’s server after being input.
           A countdown timer is provided in the Btender system to assist users.



2
    Detailed instructions on how to use the Btender system for each type of operation are provided in the ‘User Guide’ available
at www.bankofengland.co.uk/markets/money/omo/outright_purchases.htm.
                                                                                      3 August 2007     65

(v)     It is the responsibility of the OMO Participants to ensure that access rights to Btender are
        assigned appropriately within their organisations. The Bank does not accept any liability for loss
        or damage, whether direct, indirect or consequential resulting from the use of, or inability to use
        Btender.


(vi)    Participants requesting use of the Standing Facilities must contact the Bank’s dealing desk via
        telephone. OMO Participants should contact the Bank on their dedicated telephone line. Other
        Standing Facilities Participants should contact the dealing desk using the number provided in a
        separate document.


(vii)   For reserve account holders, accounts are managed via Enquiry Link terminals (see section 3.2
        below).    Technical queries about reserve accounts should be directed to the RTGS system
        controllers on the number provided.


(viii) General or other queries should be made to the Bank’s dealing desk on 020 7601 5208.


(ix)    All electronic communications with the Bank are securely archived. Furthermore, all telephone
        conversations with the Bank’s dealing desk and with LS and SCS are recorded. In the event of a
        dispute, reference will be made to the archive and recordings.


(x)     Participants must supply the Bank’s dealing desk with contact names, email addresses and
        telephone and fax numbers for their front and back offices, and for their contingency sites.


(xi)    Communication regarding delivery of securities and funds depends on the type of operation. For
        short- and long-term repos communication is with LS, by telephone or email where stated. For
        outright purchases and ISDA collateral communication is with SCS, by telephone, SWIFT or
        email where stated.


(xii)   Settlement instructions for asset swaps are provided in Btender. A term sheet and a confirmation
        are generated by Btender. Participants should contact the Bank’s dealing desk by telephone or
        email in the event of any technical problems with Btender.


(xiii) When requested by the Bank, Participants should provide information required for settlement
                                                                                                     3 August 2007        66

          purposes, including standard settlement instructions (SSIs) for payments3:


                    SSIs for short and long term repo OMOs must be provided to LS. They can be updated
                    by written request to LS, signed by an authorised signatory.


                    SSIs for outright purchases of gilts must be provided to SCS. They can be updated by
                    written request to SCS, signed by an authorised signatory.


                    SSIs for swapped foreign currency bond trades (both the securities and cash payment
                    instructions) must be provided to SCS. Participants must also provide SSIs for ISDA
                    collateral, if different, to SCS. They can be updated by written request to SCS, signed by
                    an authorised signatory.        Where accounts for collateral differ or use different entities
                    from those used for trade settlement, this should be notified in advance.


                    For Reserve Account Participants that are also OMO Participants, SSIs will allow
                    payment either to a specified account or to the Participant’s Reserve Account. When
                    entering into OMO transactions Reserve Account Participants should indicate on the
                    settlement confirmation to which account funds should be paid.




3
    Changes to SSIs are expected to be infrequent. The Bank requires at least 24 hours notice to implement any changes.
                                                                                                          3 August 2007         67

3          RESERVE ACCOUNT FACILITY

(i)        Banks and building societies with CHAPS or CREST sterling settlement accounts at the Bank are
           automatically members of the reserve scheme. The reserve scheme is also open to all other banks
           and building societies that are required under the Bank of England Act 1998 to place Cash Ratio
           Deposits (CRDs) at the Bank.4


(ii)       As explained in the Eligibility Criteria, only one entity within a bank or building society Group
           may choose to join the reserve scheme5.


(iii)      The reserve scheme does not require banks or building societies to hold a particular level of
           reserves; instead Participants choose the target level of reserves they wish to hold during each
           maintenance period. Targets must be chosen ahead of each maintenance period, and are subject
           to the limits set out in section 3.3.


(iv)       All reserve accounts are held in the RTGS processor. RTGS was developed initially for the real
           time settlement of CHAPS payments, but is also used for other transactions (e.g. CREST DvP
           and settlement of retail payments e.g. BACS). RTGS has a direct interface, the Enquiry Link (see
           section 3.2 below) through which Participants manage their reserve accounts.


(v)        Account holders in RTGS are also subject to mandate agreements (or other agreements in relation
           to the operation of the account), issued separately from this Documentation.


3.1        Maintenance periods

(i)        Participants undertake to hold a target level of average reserves over the course of a maintenance
           period that is determined by the Bank of England. A calendar of maintenance periods and dates
           of       routine         OMOs           is      available         for        each        calendar          year       at
           www.bankofengland.co.uk/markets/money/documentation/index.htm. Maintenance periods run
           between one scheduled MPC decision date and the next, beginning on the day of the MPC


4
    In the event that an institution ceases to pay CRDs, following notification from the Bank, it will no longer be eligible to hold
reserves and will be required to close its reserve account with effect from the next maintenance period.
5
    ‘Group’ means a group as defined in section 421 of the Financial Services and Markets Act 2000.
                                                                                                      3 August 2007         68

           decision and ending on the day before the next month’s MPC announcement (normally a
           Thursday and a Wednesday respectively)6. Some maintenance periods are therefore four weeks
           long and some five weeks long.


(ii)       Compliance with reserve targets is determined on the basis of average reserve holdings during the
           maintenance period. Average reserve holdings are calculated as the mean of the end-of-calendar-
           day balances on reserve accounts during the maintenance period.


                    i.e. Average reserve holdings = ∑ end of calendar day balances
                                                                 number of calendar days


3.2        Accounts

(i)        All reserve accounts are held in the RTGS processor. Participants that are CHAPS sterling
           settlement banks use their RTGS settlement account to hold their reserves. CREST sterling
           settlement banks which are not also CHAPS sterling settlement banks will hold reserves on their
           sterling ordinary account. Participants which are settlement members of other payment systems
           which settle across accounts in RTGS such as BACS or Cheque & Credit Clearing, also use their
           RTGS settlement account to hold their reserves. Other Participants have a specific reserve
           account in RTGS.


(ii)       All Participants must be SWIFT members and subscribe to the Enquiry Link7 service. The same
           Enquiry Link service is also used by CHAPS and CREST settlement banks for managing their
           settlement accounts at the Bank.


(iii)      Participants manage their accounts via Enquiry Link, which is a service interface on a SWIFT
           Webstation. Messages between Enquiry Link and the RTGS processor at the Bank are provided
           over the SWIFT network. Enquiry Link allows Participants to access information about account


6
    If it is known in advance of the publication of the calendar that the MPC will be making its decision on a day of the week
other than Thursday, that will be reflected in the operational timetable so that the relevant maintenance period ends on the day
before the MPC’s decision is announced and the next maintenance period starts on the day of the announcement.
7
    The Enquiry Link Security Code of Conduct, which describes the security standards applicable to the service, also applies to
Reserve Account Participants. The Reserve Accounts User Guide provides a detailed description of the operation of reserve
accounts in RTGS.
                                                                                                3 August 2007        69

          balances, to input their target average balance and, for non-CHAPS members, to transfer funds
          from the reserve account.


(iv)      Enquiry Link is available for enquiries and receiving messages throughout the RTGS Day, until
          shortly before the RTGS processor closes.


(v)       CHAPS sterling settlement banks use their CHAPS interface to RTGS to fund and defund their
          account.


(vi)      For non-CHAPS members, reserve accounts can be funded via CHAPS payments, either from a
          CHAPS sterling settlement bank or from the Bank of England (see (viii) below). Non-CHAPS
          members’ reserve accounts can be de-funded via Enquiry Link, to generate a CHAPS payment
          either to the Bank of England (see (vii)) or to a single pre-defined account (usually at their
          CHAPS sterling settlement bank), as notified to the Bank in writing as a standard settlement
          instruction. Participants must ensure that incoming CHAPS payments are addressed to the Bank
          of England ‘RT’ CHAPS membership for the credit of their reserve account. Enquiry Link is
          available for defunding throughout the CHAPS Day. Timings for funding may be subject to any
          restrictions imposed by CHAPS settlement banks.


(vii)     Non-CHAPS/ non-CREST members are not able to make payments from their reserve accounts
          of greater size than the balance on the account8. CHAPS and CREST members are able to make
          such payments, as long as their Minimum Balance Group9 as a whole does not fall below zero.


(viii) Reserve accounts can also be funded and de-funded through use of the Bank’s Open Market
          Operations and Standing Facilities: see details in section 4.4.4 (OMOs) and section 6.6.4
          (Standing Facilities).


(ix)      On the final day of the maintenance period, Participants which are also CHAPS sterling
          settlement banks are able to make payments to each others’ reserve accounts for a ten minute
          period after the final cut-off for CHAPS payments.

8
    If a defunding payment is entered for more than the current balance on a reserve account, the payment will be queued
awaiting incoming funds and cancelled at the end of the day if no funds are forthcoming.
9
    The Minimum Balance Group is the term for the group of settlement and liquidity accounts held by each CHAPS or CREST
member at the Bank of England.
                                                                                                        3 August 2007         70

(x)        All Participants are able to borrow or deposit funds using the Standing Facilities at a spread of +/-
           25bp around Bank Rate on the final day of the maintenance period (see section 6). These will be
           available all day and for a further ten minute period after the close of the CHAPS sterling
           settlement bank only window described in (ix).


3.3        Reserve targets

(i)        Participants are free to choose their individual reserve targets for each maintenance period subject
           to the following constraints, as currently set:

                •   A minimum threshold of £ nil
                •   Set in multiples of £10 million
                •   Ceilings as set out in (ii) below.


(ii)       Ceilings on reserve targets are currently calculated as 2% of the sterling eligible liabilities for the
           Participant’s Group10, as calculated for CRD purposes, or an amount of £1 billion, whichever is
           the higher. Ceilings will be rounded up to the nearest £10 million.


(iii)      Eligible liabilities are calculated routinely twice a year, in May and November, and new ceilings
           take effect from the maintenance periods which start in June and December. In the event of an
           unusually large shift in sterling eligible liabilities, a Participant is able to ask for its ceiling to be
           recalculated sooner, by contacting the Bank’s sterling dealing desk. The Bank also reserves the
           right to make such a recalculation without a request from the institution.


(iv)       Participants should specify, via the Enquiry Link, their intended reserve target for the next
           maintenance period no later than two working days before the start of that maintenance period. If
           no notification is made by that time the previous target continues to apply. The Bank announces
           the aggregate reserve target for all Reserve Account Participants in a screen announcement on its
           wire services pages (listed in Appendix IV(a)) the working day following the deadline for
           notifying reserve targets (i.e. one working day prior to commencement of the relevant
           maintenance period).



10
     Eligible liabilities for a bank or building society group will be calculated as the sum of eligible liabilities across all UK
based banks and building societies within that Group, not including overseas banks/building societies or insurance
companies.
                                                                                                    3 August 2007         71

(v)        There are no constraints on the size of changes to reserve targets from one maintenance period to
           the next (subject to the new target meeting the constraints set out above). The Bank however
           reserves the right to impose constraints.


(vi)       The Bank will keep Participants’ performances in meeting their reserve targets under review and
           would wish to receive explanations in the event of persistent or unusually large shortfalls or
           excesses.


3.4        Remuneration and charges

(i)        Although Participants declare their reserve targets as point targets, for the purposes of
           remuneration the Bank specifies each reserve target as a narrow band. The band is currently +/-
           1% of the point target declared.


(ii)       Interest on reserves is currently paid as follows:


           •   Average reserves within the target band are remunerated at Bank Rate.


           •   Where average reserves (as calculated in section 3.1) are higher than the target band, the
               excess above the upper band is not remunerated.


           •   Where average reserves are lower than the target band, the actual average balance is
               remunerated at Bank Rate. In addition, a deduction, charged at Bank Rate, is made on the
               shortfall between the target band lower limit and the actual average reserve balance11.


           •   On the basis of 365 days a year.




11
     This has an equivalent effect to the charges described in the framework document published on 4 April 2005, which stated
that institutions would be paid interest on a balance equal to the lower band but charged twice Bank Rate on the shortfall
below the lower band.
                                                                                       3 August 2007           72



        Example


        Banks A, B and C each have target balances of £1.5 billion; the maintenance period is assumed to
        last 28 days and Bank Rate is assumed to be 5%.


                                   Actual average
                       £million           balance     1% upper band       1% lower band        Interest paid
   Target for banks A, B and C             1500.0             1515.0             1485.0
   Bank A                                  1504.6                                                      5.77
   Bank B                                  1561.8                                                      5.81
   Bank C                                  1477.6                                                      5.64


        Bank A has an average reserve balance within the target band. It is paid interest on its average
        balance:


        1504.6* (0.05/365*28) = £5.77 million (where /365*28 adjusts for annual interest paid over 28
        days)


        Bank B has an average reserve balance above the 1% target band upper limit. It is paid interest
        on the balance up to the higher band and nothing on the excess:


        1515* (0.05/365*28) = £5.81 million


        Bank C has an average reserve balance below the lower band. It is paid interest on its average
        balance but interest is also deducted on the shortfall between its average and the lower band:


        1477.6*(0.05/365*28) – (1485-1477.6)*(0.05/365*28) = £5.64 million


        The Reserve Accounts User Guide contains a detailed description of the calculations used for
        reserve account remuneration.
        (www.bankofengland.co.uk/markets/money/documentation/index.htm)


(iii)   Interest, calculated as described in (ii) above, paid up to and including the last day of the
        maintenance period, is credited directly to the Participant’s reserve account on the first day of the
                                                                                                       3 August 2007     73

           following maintenance period.


(iv)       Interest paid and deductions (where applicable) appear as two separate postings to the reserve
           account. (The interest calculated in the example above is the net of these two postings.)


(v)        CHAPS or CREST settlement bank overdrafts on individual days during the maintenance period
                                                    12
           are charged at twice Bank Rate                . The overdraft charge is deducted from the account the next
           working day.


(vi)       The RTGS Tariff continues to apply to CHAPS/CREST settlement banks’ RTGS accounts and is
           described in the RTGS Reference Manual.


3.5        Excess reserves

(i)        When Participants hold reserves in excess13 of their target, they may become ‘locked in’ before
           the end of the maintenance period. (‘Locking in’ means that it is no longer possible to bring the
           average balance back within the target band even if the account balance is reduced to zero for the
           rest of the period.) Absent any action from the Bank, any such excess reserves held would mean
           that other Reserve Account Participants would be unable to meet their reserve targets. The Bank
           therefore ‘recycles’ these excess reserves back to the market in subsequent short-term OMOs or
           the end of maintenance period fine-tuning operation (see section 4.2). Enough funds should
           therefore always be provided to enable all other Participants to achieve their average reserve
           targets.


3.6        Contingencies

(i)        If it became known after the publication of the annual maintenance period calendar, but before
           the start of the relevant maintenance period, that the date of an MPC decision had been changed,
           then the operational timetable would be adjusted so that the relevant maintenance period
           nevertheless ended on the day before the Committee’s decision was announced, and the next
           maintenance period started on the day of that announcement. The timing and maturity of the
           Bank’s OMOs would also adjust (see section 4.1.1). Such changes would be announced as soon

12
     Given that there is an interest rate charge on overdrafts, CHAPS/ CREST settlement banks with overdrafts on any day are
considered to have held a zero balance on that day for the purposes of calculating period-average reserve balances.
13
     i.e. their average balance at the end of the maintenance period is greater than the upper band.
                                                                                                    3 August 2007      74

          as possible.


(ii)      Once a maintenance period has begun, however, the date of the final day of that maintenance
          period would not be changed, even if the date of the MPC decision were to change unexpectedly
          at short notice so that a decision was, in the event, announced during the maintenance period. In
          such circumstances, reserve balances would be remunerated at Bank Rate prevailing at the end of
          each day (i.e. the CHAPS close) on which reserve balances were held. Charges on shortfalls (in
          the event of a Participant’s failure to meet its reserve target) would be made at Bank Rate
          prevailing at the end of the maintenance period.14


(iii)     If the CHAPS close were delayed on a particular day as a result of a CHAPS extension (for
          example following system difficulties) then, consistent with the objective of the extension to
          ensure that the day’s business could be completed, the Bank would ensure that payments could be
          made to and from reserve accounts until CHAPS closed (or until any previous deadline agreed by
          a Participant with its CHAPS sterling settlement bank).


(iv)      In the event of an Enquiry Link failure, where the RTGS processor is not affected, non-CHAPS
          reserve account holders may request the Bank to enter defunding CHAPS payments on their
          behalf. In the event of an Enquiry Link failure two days before the end of a maintenance period,
          reserve account holders may also request the Bank to enter target balances on their behalf. RTGS
          System Control should be the first point of contact.


(v)       In the event of a major operational or financial disruption to the money markets or their
          supporting infrastructure, Reserve Account Participants may wish to hold reserves above the
          Bank’s ceilings. In such circumstances, the Bank would be able to raise these ceilings.


(vi)      In the event of a major operational or financial disruption to the money markets or their
          supporting infrastructure during a maintenance period, the Bank would, if necessary, be able to
          increase the supply of central bank money through regular or exceptional OMOs, In such
          circumstances, the Bank could also raise reserve targets and/or widen the range around them so
          that Reserve Account Participants would not be obliged to use the standing deposit facility in

14
     The Enquiry Link User Guide for Reserve Accounts contains a detailed description of the calculations used for reserve
account remuneration including in the event of a change to Bank Rate during a maintenance period.
                                                                                      3 August 2007       75

        order for the Bank to be able to absorb the additional reserves.


(vii)   If a major operational or financial disruption meant that the money markets were no longer
        functioning effectively to distribute reserves amongst Reserve Account Participants, leaving
        some short relative to their targets, the Bank would also be able to widen the range around
        reserves targets even if it had not supplied additional central bank money through OMOs.


(viii) The Bank would endeavour to inform all affected Participants as soon as possible by screen
        announcement, telephone or email of the response it had decided to adopt in a contingency
        situation.


(ix)    In the event of a low Bank Rate, the arrangement described in section 3.4 (v) would lead to
        interest charges that would also be low, and possibly no higher than the charges entailed in
        making use of Standing Facilities. To avoid that outcome, the interest charge on average excess
        reserves or shortfalls in a maintenance period as a whole would not fall below 2%. The charge for
        settlement bank overdrafts on individual days would not fall below Bank Rate plus 2%.
                                                                                   3 August 2007     76

4       OPEN MARKET OPERATIONS - REPURCHASE TRANSACTIONS


4.1     Weekly Short-term Repo Open Market Operations

4.1.1 Introduction

(i)     In its main short-term repos the Bank lends money via reverse repo of Eligible Securities. The
        repos are conducted weekly, and ordinarily have a maturity of one week. The first repo of the
        maintenance period normally takes place on the day of the MPC’s interest rate decision (i.e. the
        first day of the maintenance period), and short-term repos will therefore normally take place on
        Thursdays. If a Thursday were to fall on a day that is not a Business Day, the timing and
        maturity of the Bank’s repos would be adjusted.


(ii)    If the MPC were known in advance to be moving its interest rate announcement to a day other
        than a Thursday, and the timing of reserve maintenance periods had been changed, the timing and
        maturity of the OMOs would shift accordingly. The timing of the fine-tuning operation (see
        section 4.2) would also shift accordingly.


(iii)   Settlement is same day.


(iv)    The timetable for the Bank’s OMOs is published annually at
        www.bankofengland.co.uk/markets/money/documentation/index.htm and also in Appendix II.


(v)     The Bank’s short-term repo OMOs take place in the Btender system. If the Btender system were
        unavailable before the operation, the operation would take place by telephone (see User Guide).
        If Btender were to become unavailable during the operation, the operation would be cancelled
        and run later in the day by telephone if Btender remained unavailable and if the Bank determined
        it was able to do so. Participants would be given 30 minutes notice of the start time via screen
        announcement on its wire service pages.


4.1.2 Rates

(i)     The Bank conducts short-term repos at Bank Rate set by the Monetary Policy Committee
        announced in advance.
                                                                                           3 August 2007    77


4.1.3 Publication of Forecast

(i)        The Bank publishes for information a forecast of the day’s holdings of aggregate reserves on its
           wire services pages (listed in Appendix IV(a)) at 10.00 each day.          On the day of the weekly
           OMO, the Bank publishes at 09.00 the size of the week’s short-term OMO, being the forecast
           weekly liquidity position adjusted for errors in the previous week’s forecast. The Bank also
           republishes the aggregate reserves forecast when the results of the short-term repo are announced.
           In the event of underbidding the reserves forecast would be revised.


(ii)       The Btender system will set out the amount and maturity of that day’s OMO, and the current
           Bank Rate (see Appendix XV).                 This information is also available on the wire services
           announcement substantially in the form of Appendix IV(b).


4.1.4 Invitation for Bids

(i)        The Bank normally conducts short-term repo OMOs at 10.00. On the day of the MPC’s Bank
           Rate announcement, the Bank conducts its short-term repo OMOs at 12.15.


(ii)       Bids may be submitted once the operation begins in Btender. The Bank will announce the start of
           bidding on its wire service pages (listed in Appendix IV(a)).


4.1.5 Submission of Bids

(i)        The Bank permits one bid per Participant.


(ii)       Participants must enter and submit details of their bid in the Btender system within five minutes
           of the published start of the operation. As described in section 2.2, a countdown timer is provided
           in Btender. The time stamp applied to the bid upon receipt by the Bank is final and binding in all
           cases.


(iii)      Participants must state the total amount of funds for which they wish to apply.15


(iv)       The minimum amount for each bid is £5 million and the minimum increment size is £1 million


15
     Example screens are in the User Guide, Section 7
                                                                                           3 August 2007   78

           (Appendix XIV contains a summary of all parameters supporting each tender type).


(v)        The maximum total size of a Participant’s bid may not be greater than a fixed percentage of the
           size of the short-term repo OMO. The percentage limit is currently 40% (see also Appendix
           XIV).


(vi)       Participants may cancel or amend bids using the Btender system at any point up to the close of
           the operation16. Bids which are submitted as at the close of the operation are irrevocable. By
           submitting a bid a Participant is committed, if its bid is accepted, to entering into repo
           transactions up to the amount specified in the bid, the details of those transactions being
           determined in accordance with the procedures described below.


(vii)      Participants may not bid through, nor discuss their bids with, third parties.


(viii) In the event of a dispute, reference may be made to the Btender system archive or recordings of
           telephone conversations.


4.1.6 Acceptance of Bids

(i)        The Bank aims to announce the result of each operation within five minutes of its close, or as
           soon as possible thereafter, stating the total amount of funds to be provided. The aggregate
           results are published on the wire services (see examples in Appendix IV (b)) and are also notified
           to those eligible to bid in the operation via the Btender system. Participants access their
           individual allocations via the results screen in the Btender system to confirm whether the full
           value of their bid has been accepted or, if not, what amount of their bid has been accepted.
           Should Btender not be available, the Bank would call each Participant by telephone to confirm
           allocations.


(ii)       Notwithstanding any provision in these Operating Procedures the Bank reserves the right to
           accept individual bids in part and in amounts determined by the Bank, and to reject individual
           bids.




16
     See User Guide, Section 7 for details.
                                                                                         3 August 2007       79

(iii)   If the aggregate bids for funds exceed the amount the Bank wishes to allot, the Bank will scale
        bids down on a pro-rata basis (subject to point (ii) above). Scaled bids will be rounded down to
        the nearest allocation increment, currently set at £0.1 million (see Appendix XIV).


(iv)    If the aggregate bids for funds fall short of the amount offered by the Bank, the shortfall of funds
        will be taken into account in the next scheduled short-term repo in the maintenance period,
        including if necessary the routine fine-tuning operation on the final day of the maintenance period
        (see section 4.2 below). The Bank may choose to smooth the provision of funds over more than
        one remaining short-term repo operation in the maintenance period.


4.1.7 Trade Callover

(i)     Participants should, within 30 minutes after the publication of the results of the short-term repo,
        telephone LS to confirm the cash amounts allotted to them and the Repurchase Prices of the
        repos. Participants should at the same time inform LS of the types of collateral to be provided.
        Details of collateral eligible for OMOs can be found in chapter 7 below.


4.1.8 Delivery Confirmation

(i)     Settlement takes place on a same day basis. The intra-day settlement deadlines and procedures
        for delivery of the different types of collateral are set out in section 4.4. Full details of securities
        to be delivered should be sent using the forms in Appendix VII (a) to (d) within one hour after the
        publication of results of the short-term OMO.


(ii)    Failure to identify the securities to be delivered under a transaction by the above deadline may
        result in cancellation of the transaction by the Bank. No securities will be accepted by the Bank,
        and consequently no payment made, until the delivery confirmation has been received. The Bank
        reserves the right to reject the composition of any transaction.


(iii)   Failure to comply with any of these deadlines may result in the Bank withholding payments on
        any other transactions under this Documentation.


4.1.9 Netting of deliveries

(i)     Subject to prior agreement with the Bank, Participants may combine all securities of the same
        issue, series, delivery mechanism and currency to be delivered or returned on the same day, into a
                                                                                                      3 August 2007         80

           single transfer of a net quantity of securities. If the Bank agrees, securities to be returned as part
           of a maturing repo can be offset against securities to be delivered as part of a new repo, resulting
           in a single delivery of securities by the Participant or the Bank, or no delivery in either direction.


(ii)       Participants should telephone LS before 08.00 on the day of the repo maturity, or before 11.30 on
           the day of an MPC decision, to register their intention to net. Participants should also indicate,
           when confirming the details of the securities to be delivered, which securities they wish to net
           from the maturing repo(s) and state the value of the net flow.17


(iii)      It is also possible to net cash payments - see section 4.8.2 below. Where CREST securities,
           which settle on a delivery versus payment basis, are netted the corresponding cash payments must
           also therefore be netted.


4.1.10 Transaction Confirmation

(i)        Under normal circumstances, the Bank will by 10.00 on the day following each transaction send
           an email (or other form of communication determined by the Bank) to each Participant
           confirming details of the agreed repo transactions.               This notification will contain, for each
           transaction, particulars of the securities (except in the case of DBVs), the value of the repo, the
           rate applied, the Maturity Date and the Repurchase Price for the securities. The notification may
           take the form of the delivery confirmation Appendix VII (a) to (d) sent by the Participant
           electronically countersigned by an Authorised Signatory of the Bank.


4.2 Fine-tuning operations

4.2.1 Procedures

(i)        The Bank conducts a routine overnight fine-tuning operation on the final day of each
           maintenance period (normally the Wednesday preceding the Thursday MPC decision). This
           operation is normally conducted at 10.00. They are conducted on Btender. If Btender were not
           available before the operation commences, the operation would be conducted by telephone. If
           Btender becomes unavailable during the operation, the operation would be cancelled and run later

17
     New business confirmations are listed in Appendix VII (a) to (b) and maturity confirmations are listed in Appendix XII (a)
to (d).
                                                                                        3 August 2007    81

        in the day by telephone if Btender remained unavailable and if the Bank determined that it was
        able to do so. Participants would be given 30 minutes notice of the start time via screen
        announcement.


(ii)    The Bank reserves the right to conduct additional fine-tuning operations on days other than the
        final day of the maintenance period if circumstances are such that this is needed to ensure a
        smooth pattern of reserve supply and so to achieve its rate-setting objective. Such additional
        operations will be set out in Btender and announced on the Bank of England’s wire service pages
        (listed in Appendix IV(a)). They may not always be of overnight maturity. They are conducted
        on Btender unless the system is not available, in which case they would be conducted by
        telephone.


(iii)   Fine-tuning operations may provide or withdraw liquidity and are effected by reverse repo or
        repo operations. Both are conducted at Bank Rate.


(iv)    The procedures for announcements and bidding in fine-tuning operations, including the relevant
        bidding/results/announcements are the same as for the main short-term repo OMOs (see section
        4.1), with the exception that the size of the fine-tune is published at 09.30 not 09.00.


(v)     If the size of the fine-tuning operation is greater than £500 million, the maximum total size of a
        Participant’s bid may not be greater than the fixed percentage of the size of the total that applies
        to short-term repo OMOs described in section 4.1.5 (v). That limit is currently set at 40%. If the
        size of the fine-tuning operation is less than £500 million, normally there will not be any
        restriction on the proportion of the total amount bid.


4.2.2 Liquidity providing fine-tuning operations

(i)     The procedures for payments of funds and procedures and deadlines for delivery of Eligible
        Securities in liquidity providing fine-tuning operations are the same as for short-term repo OMOs
        (see section 4.4).


(ii)    For liquidity providing overnight fine-tuning operations, no maturity confirmation is required
        unless the account to which the Participant wishes to return securities differs from the one
        indicated on the original confirmation or the Participants wishes to net securities and/or cash
                                                                                      3 August 2007      82

         against a new repo. In this situation, the appropriate maturity confirmation (Appendix XII (a) to
         (d)) should be completed. The appropriate maturity confirmation should also be completed for
         fine-tuning operations of greater than overnight duration.


4.2.3 Liquidity withdrawal fine-tuning operations

(i)      Under normal circumstances, the Bank will deliver gilt DBV, including sterling Treasury bills, as
         collateral against funds deposited in the liquidity withdrawal fine-tuning operations. The DBV
         class delivered is Unstripped British Government Stock (UBG).


(ii)     Participants pay a Purchase Price, on a DvP basis in CREST, on the cash leg of the repo equal to
         their accepted bid. The Market Value of securities delivered to Participants by the Bank equals
         the Purchase Price divided by the appropriate Margin Ratio (see section 7.7.8) (i.e. the Bank
         takes a margin). The Repurchase Price paid by the Bank when Equivalent Securities are returned
         includes interest calculated at Bank Rate.


(iii)    Participants should confirm the details using the form at Appendix VIII within one hour of
         publication of the results of the fine-tuning operation.


4.3      Long-term Repo Open Market Operations

4.3.1 Introduction

(i)     The Bank conducts long-term repo (LTR) Open Market Operations of three-, six-, nine- and
        twelve-month maturities.     LTR OMOs are conducted on a monthly basis, according to the
        schedule set out in Btender. The timetable is also published on the Bank of England website at
        www.bankofengland.co.uk/markets/money/documentation/index.htm.


(ii)    All maturities are offered at each tender. Maturities are normally 91 days, 182 days, 273 days and
        364 days, but are occasionally slightly longer to ensure that they coincide with the settlement date
        of the previous LTR OMOs. Twelve-month LTR OMOs are never longer than 364 days, so may
        on occasion mature before the date of the subsequent twelve-month OMO.


(iii) Bidding takes place over Btender. If Btender were not available, or becomes unavailable during
        the operation, the Bank would cancel the LTR OMO. If Btender were to become operational later
                                                                                     3 August 2007     83

       in the day, the operation would be run later on the same day. Participants would be given 30
       minutes notice of the start time via screen announcement. If the operation could not be run on the
       same day the operation would not be rescheduled for another day during that quarter. The size of
       short-term repo OMOs would therefore increase commensurately. The Bank may, however,
       increase the sizes of LTR OMOs in subsequent quarters.


(iv) Settlement is on the day after the operation i.e. on a T+1 basis. LTR tenders are normally held on
       a Tuesday for settlement on the third Wednesday of each month.


4.3.2 Rates


(i)    Rates on LTR OMOs are fixed for the life of the repo and are determined via variable rate tenders
       on a discriminatory rate basis.


4.3.3 Publication


(i)    The Bank publishes the exact amounts to be offered at each maturity and the maturity dates one
       week before the operation, normally on a Tuesday at 11.00. The Bank also publishes on the first
       working day of each quarter the size of LTR OMOs for the forthcoming quarter (see Appendix II).
       This information is set out in the Btender system (see examples in Appendix XV).              This
       information is also available on the wire services announcement substantially in the form of
       Appendix IV(b).


4.3.4 Invitation for bids

(i)    The Bank normally conducts LTR OMOs at 10.00.


(ii)   Bids may be submitted once the operation begins in Btender. The Bank will announce the start of
       bidding on its wire service pages (listed in Appendix IV(a)).


4.3.5 Submission of bids

(i)    Participants must enter and submit details of their bids in the Btender system within 30 minutes of
       the published start of the OMO. As described in section 2.2, a countdown timer is provided in
       Btender. The time stamp applied to the bid upon receipt by the Bank is final and binding in all
                                                                                                         3 August 2007         84

         cases.


(ii) Participants should enter the amount(s) of funds for which they wish to apply at which
         maturity(ies) and the rate(s) at which they wish to bid18. The number of decimal places allowed
         for the bid rate is currently set at 3 (see also Appendix XIV). There is no minimum bid rate.
         Btender has built in plausibility checks which aim to prevent mistakes in inputting and bids entered
         which deviate by a fixed range from market rates as observed by the Bank will be automatically
         rejected (and the user notified). That range is currently set at +/-50bps (see summary of parameters
         in Appendix XIV). Participants also have the option of setting their own tighter plausibility limits
         in the Btender system, and bids outside these limits will automatically be rejected. The User Guide
         contains further information on this process.


(iii) The minimum bid amount is currently set at £5 million and the minimum bid increment is
         currently set at £1 million (see Appendix XIV).


(iv) The maximum total size of (Participant) bids may not be greater than a fixed percentage of the size
         of the repo. This limit applies to the sum of all bids submitted across all maturities19. The
         percentage limit is currently set at 40% (see Appendix XIV).


(v) The Bank will not currently limit the maximum number of bids which can be submitted for each
         LTR OMO maturity and across the entire operation (see Appendix XIV).


(vi) Participants may cancel or amend bids using the Btender system at any point up to the close of the
         operation20. Bids which are submitted as at the close of the operation are irrevocable.                               By
         submitting a bid a Participant is committed, if its bid is accepted, to entering into repo transactions
         up to the amount specified in the bid(s), the details of those transactions being determined in
         accordance with the procedures described below.

18
     See User Guide, Section 8 for details


19
     For example, if the Bank were offering £1 billion at each of 3, 6, 9 and 12 months (so £4 billion in total) and the percentage
limit was 40%, a Participant could not bid for more than £1.6bn in total but it could bid for all the £1 billion on offer at 3
months.


20
     See User Guide, Section 8.
                                                                                     3 August 2007      85

(vii) Participants may not bid through, nor discuss their bids with third parties.


(viii) In the event of a dispute, reference may be made to the Btender archive (or, if appropriate,
       recordings of telephone conversations).


4.3.6 Acceptance of bids

(i)    The Bank aims to announce the result of each operation within ten minutes of its close, or as soon
       as possible thereafter, stating the total amount of funds to be provided at each maturity, the
       weighted average rate, the lowest accepted rates and the scaling (the percentage allotted at the
       lowest accepted rate) for each maturity. The aggregate results are set out in Btender and are
       available for information on the wire services (see Appendix IV(b)).


(ii)   Participants access their individual allocations via the results screen in the Btender system (see
       example in Appendix XV) to confirm whether the full value of their bids have been accepted or, if
       not, what amount of their bids have been accepted. Should Btender not be available, the Bank
       would call each Participant by telephone to confirm allocations.


(iii) Notwithstanding any provision in these Operating Procedures the Bank reserves the right to reject
       individual bids and to accept individual bids in part and at amounts determined by the Bank. Bids
       are accepted at the rates bid.


(iv) Funds are allocated in descending order of offered interest rates. Bids at the highest rate are
       accepted first, and subsequently bids with successively lower rates are accepted until the total
       amount of liquidity to be allotted at that maturity is exhausted. Bids which are accepted at the
       lowest rate may be scaled down on a pro rata basis and rounded down to the nearest allocation
       increment, currently £0.1 million (set out in Appendix XIV). The amount of each accepted bid will
       be the purchase price to be paid to the applicant.


(v)    If the aggregate bids for funds fall short of the amount offered by the Bank, the shortfall of funds
       will be taken into account in the next scheduled short-term repo in the maintenance period.




4.3.7 Trade Callover
                                                                                        3 August 2007         86

(i)     Participants should, within 30 minutes after the publication of the results of the LTR OMO,
        telephone LS to confirm the cash amounts allotted to them for each maturity date and the
        repurchase prices of the repos. Participants should at the same time inform LS of the details of the
        collateral types to be provided. Details of collateral eligible for OMOs can be found in section 7.


4.3.8 Delivery Confirmation

(i)      Settlement takes place on a T+1 (next-day) basis.         The intra-day settlement deadlines and
         procedures for delivery of the different collateral types will be the same as for short-term repo
         OMOs (see section 4.4). The final details of securities to be delivered should be sent using the
         forms at Appendix VII (a) to (d) as soon as possible, but in any event by 08.00 on settlement day.


(ii)     Failure to identify the securities to be delivered under a transaction by the above deadline may
         result in cancellation of the transaction by the Bank. No securities will be accepted by the Bank,
         and consequently no payment made, until the delivery confirmation has been received. The Bank
         reserves the right to reject the composition of any transaction.


(iii)    Failure to comply with any of these deadlines may result in the Bank withholding payments on
         any other transactions under this Documentation.


4.3.9 Transaction Confirmation

(i)     Under normal circumstances, the Bank will by 10.00 on the day following settlement of each
        transaction send an email (or other form of communication determined by the Bank) to each
        Participant confirming details of the agreed repo transactions. The notification will contain, for
        each transaction, particulars of the securities (except in the case of DBVs), the value of the repo,
        the rate applied, the Maturity Date and the Repurchase Price for the securities. The notification
        may take the form of the delivery confirmation Appendix VII (a) to (d) sent by the Participant
        electronically countersigned by an Authorised Signatory of the Bank.


4.4      Delivery of repo securities to the Bank

(i)      The following delivery procedures apply to short-term repos, long-term repos and liquidity-
         providing fine-tuning operations. Eligible Securities are delivered to the Bank by a number of
         different methods.
                                                                                        3 August 2007       87



(ii)    Participants are required to deliver securities with an adjusted Market Value at least equal to the
        accepted request for funds. For short-term OMOs and long-term OMOs, but not overnight fine-
        tuning OMOs or use of the standing lending facility, Participants are also required to deliver
        additional securities, by means other than the DBV facility, with an adjusted Market Value at
        least equal to the full amount of interest that will be payable at the maturity of the repo. Securities
        already held at the Bank, but not required to cover other repos with the Bank, may be identified
        and used by the Participant for this purpose. The adjusted Market Value is the Market Value of
        the securities divided by the appropriate Margin Ratio. For details on valuation and the Margin
        Ratios applied to securities, see section 7.


4.4.1 Summary of deadlines for delivery of securities to the Bank:


          Deadline
          14.30              CREST Securities (Member-to-Member
                             deliveries and CREST RPO)

          15.00              Euroclear or Clearstream Securities

          15.00              CCBM Securities

          15.00              Transfers from RTGS collateral account

          15.45              DBV Securities



        These deadlines apply to 10.00 and 12.15 operations. Failure to comply with a delivery
        deadline may result in cancellation of the transaction by the Bank and potentially a review
        of OMO Participant status.


4.4.2 CREST

(i)     Securities should be delivered to the CREST Account which has been specified to the Participant
        by LS. Delivery details across CREST should conform exactly to details given in Appendix VII
        (a) and (b).


(ii)    Member-to-Member Deliveries including CREST RPO deliveries to be sold to the Bank for repos
        should be delivered to the relevant CREST account by 14.30.


(iii)   Delivery-By-Value (DBV) repos entered for operations, whether conducted at 10.00 or at 12.15,
                                                                                                   3 August 2007         88

         should be input and matched in CREST as early as possible, given the highest priority available
         to users of the system (currently 90) and settled no later than 15.45.


(iv)     Participants may pre-position securities for participation in OMO repos or the standing lending
         facility in Member-to-Member form. (This is not possible for CREST RPO deliveries or DBV.)
         The Bank reserves the right to levy its own charges. Where securities are pre-positioned, they
         will be held as detailed in the Terms and Conditions, section B.5.7.


(v)      If securities are pre-positioned in CREST (Member-to-Member form) and Participants are not in
         the event allocated funds to the full (adjusted) value of the securities pre-positioned, the Bank as
         a result will be holding securities with a value greater than that required to cover the margined
         repurchase value of the repo (see section 7.8 below on valuation and Margin). Participants have a
         right to receive Equivalent Securities and should notify the Bank when they require the return of
         such securities. The Bank will return the securities as soon as practicable.


(vi)     Subject to prior agreement with LS, Participants may effect delivery of securities sold to the Bank
         by way of repo by making a series of fractional deliveries of such securities. The Bank will
         advance to the Participant the adjusted Market Value of securities as they are delivered, or such
         lesser amount as may be agreed with the Participant, provided that appropriate settlement
         confirmation has been received by the Bank.


4.4.3 Euroclear/ Clearstream or CCBM21

(i)      Participants should inform LS if they are offering securities held in Euroclear or Clearstream, or
         offering securities delivered by CCBM, when they telephone to obtain confirmation of the cash
         amounts allotted to them.


(ii)     Participants can offer Eligible Securities held in Euroclear or Clearstream and receive same-day
         funds for these securities provided they input the relevant settlement instructions and the
         securities are delivered by 15.00. Securities must be input on a matching basis for delivery to the


21
     The Correspondent Central Banking Model (CCBM) is the system under which Participants in Bank of England or
Eurosystem money market operations (or intraday liquidity in TARGET) can obtain credit by making use of securities held at
the domestic settlement system of another Eurosystem country. Securities are delivered to the account of the central bank of
that country, which acts as custodian for the central bank granting the credit.
                                                                                       3 August 2007      89

        appropriate Bank of England accounts in Euroclear or Clearstream.


(iii)   Securities delivered via CCBM should be delivered to the Bank’s account at the relevant
        custodian central bank no later than 15.00. Settlement details can be obtained from LS.


(iv)    Participants may pre-position securities for participation in repo OMOs or the standing lending
        facility. The Bank reserves the right to levy its own charges for holding pre-positioned securities.
        Where securities are pre-positioned, they will be held as detailed in the Terms and Conditions,
        section B.5.7.


(v)     If securities are pre-positioned with the Bank via Euroclear, Clearstream or CCBM and
        Participants are not in the event allocated funds to the full (adjusted) value of the securities pre-
        positioned, the Bank as a result will be holding securities with a value greater than that required
        to cover the margined repurchase value of the repo (see section 7.8 below on valuation and
        Margin). Participants have a right to receive Equivalent Securities and should notify the Bank
        when they require the return of such securities. The Bank will return the securities as soon as
        practicable.


(vi)    Subject to prior agreement with LS, Participants may effect delivery of securities sold to the Bank
        by way of repo by making a series of fractional deliveries of such securities. The Bank will
        advance to the Participant the adjusted Market Value of securities as they are delivered, or such
        lesser amount as may be agreed with the Participant, provided that appropriate settlement
        confirmation has been received by the Bank.


(vii)   Delivery of securities held in Euroclear and Clearstream should conform exactly to details given
        in Appendix VII (c) and (d).


(viii) The Bank may designate from time to time specific links between Euroclear or Clearstream and
        national central securities depositories which may be used for the delivery of securities.


(ix)    Delivery details across CCBM should conform exactly to details given in Appendix VII (d).


(x)     The Bank may designate from time to time other settlement arrangements with national central
        banks which may be used for the delivery of securities.
                                                                                     3 August 2007      90




4.4.4 Payment of Funds

(i)     The Bank pays the amount of funds allotted via CREST DvP for eligible CREST securities.


(ii)    For other Eligible Securities or pre-positioned CREST securities, provided that sufficient
        securities have been received through the relevant settlement systems and confirmation
        acceptable to the Bank to this effect has been received, the Bank pays funds according to standard
        settlement instructions (see section 2.2). If the Participant has more than one standard settlement
        instruction, they should specify on the confirmation which payment method is required, for
        example CHAPS or RTGS.


4.5     Margin Calls for repos

(i)     Margin requirements are detailed in section 7.


4.5.1 Delivery of Margin to the Bank

(i)     If a Margin call is made by the Bank, the Participant will be notified by the Bank by 09.30 and
        details of the securities to be delivered should be sent by the Participant to LS by 10.30 on the
        day of the call.


(ii)    The Bank reserves the right to reject the composition of any proposed Margin transfer.


(iii)   Settlement of securities to be provided as additional Margin must be effected by 12.30 on the day
        the Margin is called, in the form of CREST Member-to-Member (MTM), Euroclear/Clearstream,
        CCBM securities or securities pre-positioned with the Bank e.g. from a Participant’s RTGS
        collateral pool. CREST DBV may not be delivered as Margin.


(iv)    Securities provided to the Bank as the result of a Margin call become part of a Margin pool and
        are taken into account in subsequent revaluations of securities. Such Margin Securities do not
        have a fixed date for redelivery to the Participant.


(v)     The Bank reserves the right to make Margin calls intra-day.
                                                                                        3 August 2007      91

(vi)    Where the Bank has requested additional Margin and that Margin call has not been met, the Bank
        reserves the right to utilise any securities held by the Bank in the name of the Participant, either
        in RTGS or as pre-positioned securities, or securities due to be returned on maturity of a repo
        transaction, to extinguish the Margin deficit so that the securities would then cease to be available
        for return to the Participant.


(vii)   Failure to comply with any of these deadlines may result in result in the Bank withholding
        payments on any other transactions under this Documentation.


4.5.2 Returning Margin to the Participant

(i)     If a Margin call is made by a Participant a telephone request must be made to LS by 09.30. The
        appropriate version of Appendix X should be used.


(ii)    When Participants make a Margin call on the Bank, the Bank normally, but at its discretion,
        satisfies the call by redelivering Equivalent Margin Securities before it delivers other securities.


(iii)   When no repos remain outstanding with a Participant, the Participant should notify the Bank
        when they require the return of Equivalent Securities provided as Margin.


(iv)    Timings for the return of such securities, through the relevant settlement system, are normally the
        same as those for maturing repo transactions listed in section 4.8.


(v)     The Bank reserves the right to levy charges for holding such securities if the Participant does not
        request delivery immediately. (In effect, such securities would be considered to be pre-
        positioned.)


4.6     Dividends

(i)     Amounts equivalent to dividends received by the Bank in respect of any Eligible Securities are
        paid to the Participant which sold/pre-positioned the relevant securities to/with the Bank. Such
        payments are normally made on the dividend payment date.


(ii)    When a security goes ex-dividend its value (as defined in Appendix V) falls, but the amount of
        the dividend to be received by the Bank is then taken into account in subsequent revaluations of
                                                                                       3 August 2007     92

        securities held by the Bank for the purposes of Margin maintenance as described above. This
        treatment continues until the dividend date, when the Bank pays the Participant the amount of the
        dividend, provided any call for Margin by the Bank has been satisfied and no Event of Default
        has taken place.


(iii)   Dividends are paid according to standard settlement instructions.         Where Participants wish
        sterling dividends to be credited to their Reserve Account instead, they should contact LS in
        advance of the dividend date.


4.7     Substitutions

4.7.1 General


(i)     Where repos have more than one day to maturity, Participants may, with the agreement of the
        Bank, exchange securities originally sold to the Bank, or securities delivered to the Bank by way
        of Margin, for other Eligible Securities the adjusted Market Value of which is equal to or greater
        than the adjusted Market Value of the securities to be replaced. This process is referred to in this
        Documentation as ‘substitution’ and constitutes a variation of the relevant repo transactions in the
        manner set out in the Terms and Conditions.


(ii)    As Standing Facilities and overnight fine-tuning operations are overnight transactions,
        Participants may not substitute securities sold to the Bank in these operations.


(iii)   Participants may not substitute securities held as collateral in long-term repos on the day of a
        weekly short-term repo (normally Thursdays).


(iv)    The Bank may, at its discretion, require a Participant to replace particular securities with other
        securities.


(v)     The Bank releases the securities to be replaced only after it has received the replacement
        securities.


4.7.2 Timetable


(i)     Participants should telephone LS as early as possible on the day a substitution is required and at
                                                                                       3 August 2007      93

        least 30 minutes before the confirmation deadlines. Details of securities to be exchanged should
        be sent to LS on the form Appendix XI (a) or (b) by the deadlines outlined in the table below


                                      Confirmation deadlines for substitution


                                                  Collateral released by the Bank


                                                DBV       Member-to-       CCBM /
                                                          Member/RPO       ICSD (to
                                                                           IDL
                                                                           account)
                       Collateral delivered
                       by Participant
                       CCBM (from        IDL     13.30                        10.30
                                                          13.30 (13.30)
                       account)                 (14.30)                      (10.30)
                       ICSD                      13.30        13.30           10.30
                       DBV                                                    10.30
                                                   -          13.30
                                                                             (12.30)
                       Member-to-Member                                       10.30
                                                 13.30        13.30
                       /RPO                                                  (12.30)



(ii)    The Bank endeavours to complete substitutions on a same-day basis.


(iii)   Substitution between DBVs and other securities may also be effected as described in the Terms
        and Conditions.    Where a DBV transaction replaces a transaction relating to non-CREST
        securities the Participant must pay the DBV proportion of the Purchase Price (the Repurchase
        Price less interest accrued) by 12.30 in order for the requested securities to be returned to it that
        day. CREST DBVs must be settled by 15.45. Where the repo transaction constitutes a CREST
        RPO it will not be possible to use non-CREST securities in a substitution.


(iv)    Where the Participant wishes to substitute Euroclear, Clearstream or CCBM securities,
        replacement securities must be delivered by 12.30. Where the Participant wishes to substitute
        CREST DBV or CREST Member-to-Member, replacement securities must be delivered by 14.30.


(v)     Failure to comply with a delivery deadline may result in cancellation of the proposed substitution
                                                                                        3 August 2007   94

        by the Bank.


(vi)    Failure to complete a substitution that has been requested by the Bank may result in termination
        of the repo transaction on a date specified by the Bank, to be effected by the Participant
        purchasing Equivalent Securities from the Bank.


4.7.3 Substitutions involving CREST securities


(i)     The Bank releases the securities to be replaced only after it has received the replacement
        securities. As securities in CREST are transferred on a DvP basis, the resulting cash flows may
        make it necessary for either party to make a balancing payment outside of CREST in connection
        with such a substitution. If this balancing payment is to be made by the Bank to a Reserve
        Account, the Participant should state on the email confirmation the account to which funds
        should be paid.


4.7.4 Substitutions involving HMG Non-Sterling marketable debt, Bank of England securities,
        other Eligible Securities held in Euroclear or Clearstream and CCBM securities


(i)     Transactions in Euroclear or Clearstream should be input on a matching basis. The Bank releases
        the securities to be replaced only after it has received the replacement securities.


(ii)    CCBM securities should be delivered to the Bank’s account at the relevant custodian central
        bank, details of which will be specified by LS.


(iii)   If the securities to be replaced are required to be returned before the Bank has received the
        replacement securities (for example, because of early settlement system closure) then, upon prior
        agreement with LS, a holding payment should be made by the Participant. Upon delivery of all
        replacement securities the Bank will ensure the return of this holding payment to the Participant.


4.8     Repurchase of securities

4.8.1 General


(i)     When a repo transaction matures, Participants purchase securities equivalent to those sold to the
        Bank at the commencement of the repo. On or after receiving payment, the Bank delivers to the
                                                                                         3 August 2007     95

           Participant securities equivalent to those sold to it.


(ii)       Where there has been a substitution between DBVs and other securities, the Participant is liable
           to make a separate payment representing the accrued premium on the securities replaced to the
           date of substitution, as detailed in clause B.6.11(f) and B.6.12(f) of the Terms and Conditions.
           This payment may be aggregated with a payment for the repurchase of securities. Details of any
           such payment should be included in the form of Appendix XII (a) to (d).


(iii)      When a repo transaction matures, any additional Margin provided by the Participant is returned at
           the request of the Participant provided that the Bank would not have a Net Exposure to the
           Participant as a result of such return.


(iv)       Participants should send an email in the form of Appendix XII (a) to (d) confirming the nominal
           amount and details of the securities to be purchased, the repo rate applicable to the transaction
           and the number of days for which it applied, the Repurchase Price for securities of each
           description and the total Repurchase Price. The cash details should conform exactly to the
           original confirmation sent by the Bank on the day following the Purchase Date. Confirmations
           should be sent by 08.00 on the day of the repo maturity or by 13.00 on the day of an MPC
           announcement.22


(v)        On the morning of maturity, the Bank informs Participants by telephone by 09.30 of the amount
           of any securities due to be returned that day which it intends to retain as part of the Margin
           maintenance arrangements described in section 4.5.1. Such notification constitutes a Margin call.


(vi)       Alternatively, rather than taking redelivery of the securities, the Participant may choose to leave
           the securities with the Bank, pre-positioning them in advance of further operations. In this case,
           the securities are then held as detailed in clause B.5.7 of the Terms and Conditions.


4.8.2 Netting of payments


(i)        Subject to prior agreement with LS, Participants may combine payments in the same currency, to
           be delivered or returned on the same day, into a single transaction of a net amount. If LS agrees,

22
     Subject to any prior agreed netting arrangements – see section 4.1.9
                                                                                                 3 August 2007        96

           cash to be returned as part of a maturing repo can be offset against cash to be paid as part of a
           new repo, resulting in a single net payment by the Participant or the Bank, or no payment in
           either direction.


(ii)       Participants wishing to net payments of cash must contact LS as outlined in section 4.1.9.
           Participants should indicate, when confirming the details of the securities to be purchased, that
           they wish to net payment of cash and state the value of the net amount. The appropriate maturity
           confirmation(s) should be sent within one hour of the publication of the results of the OMO23.
           The notification of an intention to net does not bind a Participant to participation in OMOs, but if
           the Participant decides not to bid, maturity payments must be made by 11.30 on non-MPC days
           and 13.00 on MPC days, or earlier if required by local settlement deadlines.


(iii)      It is also possible to net just delivery of securities in the same way (see section 4.1.9). CREST
           securities are delivered on a DvP basis such that any payments netting must also be accompanied
           by netting of the associated securities. DBV securities and associated cash are not eligible for
           netting purposes.


(iv)       Only the cash amounts corresponding to the Purchase Price (ie excluding any interest accrued) of
           maturing or new business repo can be netted. The interest accrued on a maturing repo must be
           paid separately by the 11.30 deadline (13.00 on MPC days) and cannot be offset against the
           Purchase Price of the new repo.


4.8.3 CREST sterling securities


(i)        Participants repurchasing CREST sterling securities via Member-to-Member delivery should
           match the transaction in CREST by 11.30 on the Maturity date24. On the Maturity Date of a
           Term DBV Repo transaction the Participant should make a separate payment representing the
           accrued premium by 11.30.



23
       New business delivery confirmations are listed in Appendix VII (a) to (d) and maturity confirmations are listed in
Appendix XII (a) to (d).


24
     subject to any prior agreed netting arrangements – see section 4.1.9.
                                                                                     3 August 2007      97

4.8.4 HMG Non-Sterling marketable debt, Bank of England Securities other Eligible Securities
        held in Euroclear or Clearstream and CCBM securities


(i)     Participants repurchasing the above securities must pay the Repurchase Price to the Bank by
        11.30 on the day of maturity. After payment has been received, the Bank will deliver the
        securities due via Euroclear, Clearstream or CCBM.


4.9     Contingencies

(i)     As noted in section 4.1.1, if it became known after the publication of the annual schedule of
        maintenance periods and routine repo Open Market Operations but before the start of the relevant
        maintenance period that the dates of MPC decisions had been changed, then the timing and
        maturity of the Bank’s Open Market Operations would be adjusted accordingly. Any such
        changes will be announced as soon as possible.


(ii)    As noted in section 2.2, in the event that Btender is unavailable prior to the scheduled start of a
        short-term repo or fine-tuning OMO, the operation would be conducted via telephone. It is
        therefore a requirement that OMO Participants’ front offices have a dedicated telephone line.
        Participants should contact the Bank via their dedicated telephone line to the Bank’s dealing
        desk, and the Bank will contact successful Participants with their allocations via telephone. If
        Btender becomes unavailable during the operation, the operation would be cancelled and run later
        in the day by telephone if Btender remained unavailable. Participants would be given 30 minutes
        notice of the start time via screen announcement.


(iii)   As noted in section 2.2, in the event that Btender is unavailable, long-term repo OMOs would be
        cancelled. If Btender were to become operational later in the day, the operation would be run later
        on the scheduled day if the Bank determined that it was able to do so. Participants would be given
        30 minutes notice of the start time via screen announcement. If a long-term repo OMO could not
        be run on the same day the operation would not be rescheduled for another day.


(iv)    If one or more Participants were unable to participate in a repo or fine-tuning OMO via Btender
        due to local technical problems, Participants may telephone the Bank and the Bank would enter
        bid details manually into Btender. When entering bids on a Participant’s behalf, the Bank would
        only be able to do so to the extent practicable in the circumstances, and then on the basis of its
        reasonable endeavours and at the risk of the Participant. LTR Participants bidding in this way
                                                                                      3 August 2007      98

        may only submit one bid per maturity sector. The Bank would not amend bids received by
        telephone, but would cancel bids if the request were received before the close of the tender. If the
        number of Participants seeking to bid in this way were greater than the number that the Bank
        could manage operationally, the tender would be cancelled. In the case of an LTR operation, if
        the Bank were satisfied that the local technical problems had been resolved, the tender could be
        run later in the day. Participants would be given 30 minutes notice of the start time via screen
        announcement. If an LTR operation could not be run on the same day the operation would not be
        rescheduled for another day.


(v)     If SWIFT were not operational more widely, or at the Bank (or the Bank’s DRS, as appropriate),
        the tender would be cancelled, and may be scheduled as set out in 4.9 (ii) and (iii) above.


(vi)    The Bank reserves the right to cancel a tender at any time before the results are published.


(vii)   In the event that an LTR operation is cancelled the size of short-term repo OMOs would increase
        commensurately. The Bank may however increase the size of LTR OMOs in subsequent quarters.


(viii) In the event of an unscheduled MPC meeting, or in the event that the announcement of a decision
        following a scheduled meeting were delayed, the Bank would, where possible, seek to delay any
        regular short-term OMO on that day until after announcement of the MPC’s decision. If that
        were not to prove possible, any short-term OMOs undertaken before the announcement of the
        decision would be subject to Bank Rate prevailing at the time the transactions were entered into.
        In those circumstances, the Bank reserves the right to shorten the maturity of the OMO to
        overnight and conduct another short-term OMO on the following day after the MPC had
        announced its decision. If an emergency MPC meeting were scheduled for an LTR day, the
        operation would be cancelled.


(ix)    In the event of an unplanned non-Business Day/bank holiday, on which OMOs would otherwise
        have matured, the Repurchase Date for such transactions would be extended until the next
        Business Day. Interest would be charged for the additional day at Bank Rate prevailing at the
        time the transactions were entered into.


(x)     The Bank reserves the right exceptionally to carry out fine-tuning OMOs on days other than the
        final day of the maintenance period if circumstances are such that this is needed to ensure a
                                                                                          3 August 2007   99

        smooth pattern of reserves supply and so to achieve its rate-setting objective.


(xi)    Following major operational or financial disruption to the money markets or their supporting
        infrastructure during a maintenance period but where markets and infrastructure were still
        functioning, the Bank would be able, if necessary, to meet any increased demand for central bank
        money by providing additional reserves through either regular weekly or exceptional OMOs. The
        OMOs may be for a fixed amount determined by the Bank or an offer of funds on demand. The
        Bank would aim to keep market interest rates in line with Bank Rate, while providing the
        additional funds to the market, by varying reserves targets/ranges or the rates applied to the
        Standing Facilities.


(xii)   The Bank would endeavour to inform all affected Participants as soon as possible by telephone or
        email of the response it had decided to adopt in a contingency situation.
                                                                                     3 August 2007    100

5        OPEN MARKET OPERATIONS – OUTRIGHT PURCHASES


5.1      Introduction

(i)     The Bank provides longer-term finance to the banking system as part of its Open Market
        Operations via outright purchases of gilts and high-quality foreign currency bonds (with the
        foreign currency cash flows swapped into fixed-rate sterling).


(ii)    These purchases are undertaken over Btender. If Btender is not available prior to the tender or
        becomes unavailable during the tender, the tender will be cancelled. If Btender becomes
        operational later in the day, the operation could be run on the same day if the Bank determines it
        is able to do so. Participants would be given 30 minutes notice of the start time via screen
        announcement. If the operation could not be run on the same day the operation would not be
        rescheduled for another day during that quarter. The size of short-term repo OMOs would
        therefore increase commensurately. The Bank may, however, increase the sizes of bond purchase
        OMOs in subsequent quarters.


(iii)   These outright purchases are conducted on a monthly basis, with the exception of December
        when no outright purchases are undertaken and August when no purchases of foreign currency
        bonds swapped into sterling take place. Separate operations take place each month for purchases
        of gilts and of foreign currency bonds swapped into sterling.


(iv)    Gilt tenders will normally be held on Mondays in the week after the publication of the MPC
        minutes. Swapped foreign currency bond tenders will normally be held on Wednesdays one
        week after the publication of the MPC minutes, unless that date falls in the next calendar month,
        in which case the tender will take place in the afternoon on the same Wednesday as the
        publication of the MPC minutes.


(v)     The schedule of operations is set out in the annual schedule of OMOs which is available on the
        Bank’s website at www.bankofengland.co.uk/markets/money/index.htm. The timetable is also
        available in Btender.
                                                                                                  3 August 2007       101

5.2        Amounts to be purchased, rates and maturities

(i)       The Bank offers a fixed quantity of cash in each operation (including, where appropriate, accrued
          interest on purchased bonds). Purchases are undertaken at market prices/rates determined in
          variable-rate tenders on a discriminatory price/rate basis.


(ii)      In each tender the Bank will purchase at least one bond from each of three maturity segments.
          These maturity segments are defined as 1-7 years, 8-13 years and 14-20 years, and are based on
          calendar periods (i.e. 1 January to 31 December). The Bank will usually purchase two bonds
          from each of these three segments.


(iii)     In each tender the Bank will bid for a total fixed value of bonds (based on the total proceeds,
          including any accrued interest) in each of the three maturity segments. As described in section
          5.4.4 the Bank will accept offers in descending yield order subject to pre-defined minimum and
          maximum quantities of each bond that may be purchased. This range is currently set to be no
          greater than +/- 25%25 of the central amount to be purchased of each bond.


5.3        Publication

(i)        The Bank announces the dates of the tenders and the expected aggregate size of the bond
           purchase programme annually. The Bank announces at the start of each (calendar) quarter the
           sizes of the tenders to be held in the forthcoming quarter; and reconfirms, or revises as necessary,
           the expected aggregate size of its bond purchases for the remainder of the year (see Appendix II).
           These will be available on the Bank’s website at www.bankofengland.co.uk/, the Bank’s wire
           services pages at BoE Ops (see Appendix IV), and on Btender.


(ii)       The Bank publishes the details of the specific bonds to be purchased one week prior to each
           tender, including the amounts to be offered at each maturity. This information is available on the
           wire services announcement substantially in the form of Appendix IV(b), and is also normally set


25
     For example, if £200 million was offered for one segment, to be split evenly across two bonds, between £75 million and
£125 million could be bought of each bond with purchases of the two bonds totalling £200 million. If however the two bonds
to be purchased within the maturity segment were not of similar maturities, the Bank would purchase a fixed amount of each
bond.
                                                                                        3 August 2007     102

           out in the Btender system at 11.00.


5.4        Outright purchases and delivery of gilts

5.4.1 Purchase criteria


(i)       Within each maturity segment, the Bank will purchase only conventional gilts with a minimum
          outstanding issue size of over £4 billion. However, if the issue size of a bond falls below £4
          billion after the Bank has announced its intention to purchase the bond in a tender the Bank
          would not withdraw this bond from the tender for that reason.

(ii)      The Bank will exclude from its tenders gilts that are cheapest to deliver (CTD) in any active
          futures contract, and any gilt that is trading at a significant premium in the gilt repo market. For
          these purposes the Bank defines a spread of 100bp or more below the prevailing General
          Collateral rate to be a significant premium. The Bank will also exclude those bonds that the Debt
          Management Office (DMO) has already announced that it intends to re-open at auction.


5.4.2       Invitation for offers


(i)       The outright gilt purchases normally begin at 14.15 and end at 14:45.


(ii)      Offers may be submitted once the operation begins in Btender. The Bank will announce the start
          of offering on its wire service pages (listed in Appendix IV(a)).


5.4.3 Submission of offers


(i)       Participants must enter and submit details of their offers in the Btender system within 30 minutes
          of the published start of the OMO. As described in section 2.2, a countdown timer is provided in
          Btender. The timestamp applied to the offer upon receipt at the Bank is final and binding in all
          cases.


(ii)      Participants must input the nominal sterling amount in millions for each specific gilt they wish to
          sell and the clean price they wish to offer26. The number of decimal places allowed for the price

26
     See User Guide, Section 9
                                                                                        3 August 2007    103

           is currently 3 (see Appendix XIV).


(iii)      Btender has built in plausibility checks intended to prevent mistakes in inputting and offers
           entered which deviate by a fixed range from the market price observed by the Bank at the start of
           the tender will be automatically rejected. That range is currently +/-200 pence (see Appendix
           XIV). Participants also have the option of setting their own tighter plausibility limits in the
           Btender system, and offers input outside these limits will automatically be rejected. The User
           Guide has further information on this process.


(iv)       Offers are submitted by Participants using a clean price. When offers are received in Btender
           they are also converted to a yield using the standard gilt market conversion calculation available
           on the DMO’s website27, and yield is also displayed for information to Participants.


(v)        The minimum offer amount and increment are currently set at £5 million and £1 million
           respectively (see Appendix XIV).


(vi)       The Bank will not restrict the maximum total value of gilts for purchase from a single Participant
           in each tender (see Appendix XIV).


(vii)      Participants may cancel or amend offers using the Btender system at any point up to the close of
           the operation28. Offers which are submitted as at the close of the operation are irrevocable. By
           submitting an offer a Participant is, if the offer is accepted, committed to entering into a
           transaction up to the amount specified in the offer(s), the details of those transactions being
           determined in accordance with the procedures described below.


(viii) Participants may not offer through, nor discuss their offers with, third parties.


(ix)       In the event of a dispute, reference may be made to the Btender archive (or if appropriate,
           recordings of telephone conversations).



27
     www.dmo.gov.uk.


28
     More detail is available in Section 9 of the User Guide.
                                                                                                      3 August 2007   104



5.4.4       Acceptance of offers


(i)        The Bank aims to announce the result of each tender as soon as possible after its close, stating the
           total amount purchased of each bond, the weighted average price and yield paid, the lowest
           accepted price and the scaling (the percentage allotted at the lowest accepted price) for each
           bond. In addition, the cover ratio (total offers/amount on offer) for each maturity segment will be
           published. These aggregate results will be available for information on the wire services (see
           example at Appendix IV(b)) and set out in Btender (see example at Appendix XV).


(ii)       Participants access their individual allocations via the results screen in the Btender system to
           confirm whether the full value of their offers have been accepted or, if not, what amount of their
           offers have been accepted. Should Btender not be available, the Bank would call each Participant
           to confirm allocations.


(iii)      Notwithstanding any provision in these Operating Procedures the Bank reserves the right to reject
           individual offers and to accept individual offers in part and at amounts determined by the Bank.


(iv)       All offers will be allocated in descending yield order, subject to the published minimum and
           maximum amounts to be purchased for each bond.                       Once the minimum amount has been
           allocated for each bond, the remaining amounts will be allocated based on the attractiveness of
           offers for particular bonds relative to market yields29 for that bond at the close of the tender.
           Offers will then be allocated until the total amount of liquidity to be allotted is exhausted. Offers
           which are accepted at the lowest yield may be scaled down on a pro rata basis and will be
           rounded down to the nearest allocation increment, currently set at £0.1 million (see Appendix
           XIV).


(v)        Offers are accepted in full or in part at the Participant’s offer price. The amount of each accepted
           offer in total proceeds will be paid to the Participant.


(vi)       If the aggregate bids for funds fall short of the amount offered by the Bank, the shortfall of funds
           will be taken into account in the next scheduled short-term repo in the maintenance period.

29
     Yields are based on market prices are as published by the DMO for each bond at the close of the tender.
                                                                                       3 August 2007    105



5.4.5 Delivery of gilts to the Bank


(i)     Gilt settlement takes place on a t+1 (next-day) basis in CREST for the agreed cash settlement
        value confirmed in the Btender system for successful offers.


(ii)    Securities should be delivered to the CREST account specified to the Participant by SCS.
        Delivery details across CREST should conform exactly to details given in Appendix VII.


(iii)   The Bank will accept fractional deliveries of gilts if information is provided by 12.00 on the day
        of settlement, but the entire allocation must be delivered by 14:30 on the day of settlement.


(iv)    Outright gilt purchases should be input into CREST as Member-to-Member trades. Transaction
        details should be input into CREST as soon as possible to ensure that Member-to-Member
        Deliveries are delivered to the relevant CREST account by 14.30 on the settlement date.


(v)     Failure to comply with a delivery deadline may result in cancellation of the transaction by the
        Bank and potentially a review of OMO Participant status.


5.4.6 Payment of funds


(i)     The Bank pays the amount of funds allotted via CREST DvP for gilt outright purchases.


5.5     Outright purchases and delivery of swapped foreign currency bonds


5.5.1 Purchase criteria

(i)     Within the maturity segments described above, the Bank will purchase outright those domestic-
        currency conventional bonds:

          •   issued by sovereigns rated AAA by at least two of Moody’s Standard & Poors and Fitch;

          •   have minimum issue size above £4 billion; and

          •   where the issuer’s bonds contribute at least 2% of all bonds eligible for sale to the Bank;
                                                                                          3 August 2007        106

          This criteria will be reviewed annually ahead of the announcement of the annual purchase
          programme.      The    list   of   eligible   issuers   at   a   given   time      is    available    at
          www.bankofengland.co.uk/.

          The Bank will purchase from Participants subject to clause 1 (i) in the Eligibility Criteria.

(ii)    Where possible the Bank purchases bonds from a single issuer in each tender. Where this is not
        possible, tenders will be for bonds from more than one issuer and the Bank purchases bonds from
        only one issuer in each maturity segment. Announcements as to which issuers will be purchased
        in the tenders will be made quarterly.


5.5.2 Swap structure


(i)     The Bank’s outright purchases of foreign currency bonds include a matching asset swap into
        fixed rate sterling, undertaken at the time of the bond purchase, with the same Participant,
        designed to offset exactly the foreign currency cashflows on the bond. Each foreign currency
        bond purchase and matching swap will be undertaken with the same Participant, as part of the
        same transaction agreed over the Btender system.

(ii)    These asset swaps will be structured on a par-par basis. This means the cash flows at purchase
        and maturity are set so the bond is bought at par (equal to the nominal value at maturity). This is
        the case even if the market price of the bond is trading above or below par. The purchase of the
        bond at par includes the purchase of any accrued interest on the bond.

(iii)   The swapped foreign currency bond trades will ensure the foreign currency denominated cash
        flows on the asset are swapped into fixed rate sterling. The fixed sterling rate will correspond to
        the sterling yield quoted on Btender as part of the offer.

(iv)    After the initial settlement date, the subsequent swaps cash flows occur on the coupon and
        maturity dates of the underlying bond. If a coupon or maturity date occurs on a non-Business
        Day or a day which is not a working day in the relevant market, the swaps cash flows will be
        deferred until the next Business Day, which is also a working day in the relevant market.

(v)     If the aggregate offers for funds fall short of the amount offered by the Bank, the shortfall of
        funds will be taken into account in the next scheduled short-term repo in the maintenance period.
                                                                                       3 August 2007     107

(vi)       The exchange rate into sterling for each swapped foreign currency bond purchase is fixed by the
           Bank for each tender. It is taken from the RBS fixings page available in Reuters or Bloomberg
           (see pages RBSGBPFIX01 or RFIX respectively) at 14.0030. The rate will be displayed in the
           Btender system. The equivalent sterling amount will be calculated using the given exchange rate
           and displayed in the system.


5.5.3       Invitation for offers


(i)        The outright swapped foreign bond tenders normally begin at 14.15 and end at 14:45.


(ii)       Offers may be submitted once the operation begins in Btender. The Bank will announce the start
           of offering on its wire service pages (listed in Appendix IV(a)).


5.5.4 Submission of offers


(i)        Participants must enter and submit details of their offers in the Btender system within 30 minutes
           of the published start of the OMO. As described in section 2.2, a countdown timer is provided in
           Btender. The timestamp applied to the offer upon receipt at the Bank is final and binding in all
           cases.


(ii)       Participants must input the nominal foreign currency amount(s) in millions of the foreign
           currency bond offered and the sterling yield on the matching asset swap. The number of decimal
           places permitted for the sterling yield is currently set at 3 (see the summary of parameters by
           tender type in Appendix XIV).


(iii)      There will be no maximum offer yield. The Btender system has built in plausibility checks which
           aim to prevent mistakes in inputting and offers entered which deviate by a fixed range from a
           market-based yield (described below in section 5.5.5 (v)) will be rejected automatically. That
           range is currently set at +/-50bps (see Appendix XIV). Participants also have the option of
           setting their own tighter plausibility limits in the Btender system. The User Guide has further
           information on this process.


30
     Access available shortly after 14:00.
                                                                                           3 August 2007   108

(iv)       The minimum offer amount and increment are currently set at 5 million currency units and 1
           million currency units respectively (see Appendix XIV).


(v)        The Bank will not restrict the maximum total value of bonds for purchase from a single
           Participant in each tender (see Appendix XIV).


(vi)       Participants may cancel or amend offers using the Btender system at any point up to the close of
           the operation31. Offers which are submitted as at the close of the operation are irrevocable. By
           submitting an offer a Participant is, if its offer is accepted, committed to entering into a
           transaction up to the amount specified in the offer(s), the details of those transactions being
           determined in accordance with the procedures described below.


(vii)      Participants may not offer through, nor discuss their offers with, third parties.


(x)        In the event of a dispute, reference may be made to the Btender archive (or, if appropriate,
           recordings of telephone conversations).


5.5.5       Acceptance of offers


(i)        The Bank aims to announce the result of each tender as soon as possible after its close, stating
           the total amount purchased of each bond, the weighted average yield, the lowest accepted yield
           and the scaling (the percentage allotted at the lowest accepted yield) for each bond. These
           aggregate results will be set out in the Btender system (see example at Appendix XV) and
           available for information on the wire services (see Appendix IV(b)).


(ii)       Participants must access their individual allocations via the results screen in the Btender system
           (see example at Appendix XV) to confirm whether the full value of their offers have been
           accepted or, if not, what amount of their offers have been accepted. Should Btender not be
           available, the Bank would call each Participant to confirm allocations.


(iii)      When the results are published the final confirmation will be available in Btender (see example
           at Appendix XV). This provides the detailed terms of the trade and the settlement instructions.

31
     See section 9 in the User Guide.
                                                                                          3 August 2007    109



(iv)       The Bank reserves the right to reject individual offers and to accept individual offers in part and
           at amounts determined by the Bank. Offers are accepted at the yield offered.


(v)        All offers will be allocated in descending yield order, using the sterling yield offered, subject to
           the published minimum and maximum amounts to be purchased for each bond. Once the
           minimum amount has been allocated for each bond, the remaining amount will be allocated
           based on the attractiveness of the offers received relative to market yields (see (vi) below) at the
           close of the tender. Offers will then be allocated until the total amount of cash financing to be
           allotted is exhausted. Offers which are accepted at the lowest yield may be scaled down on a pro
           rata basis, and will be rounded to the nearest allocation increment, currently 0.05 million
           currency units (see Appendix XIV). The sterling equivalent nominal amount (derived using the
           exchange rate set by the Bank prior to the tender) of each accepted offer will be the purchase
           price to be paid to the Participant.


(vi)       In order to compare offers received in tenders to market yields, the Bank will use market prices
           for each part of the asset swap32 to estimate a ‘current’ yield for the swapped foreign currency
           bond:


           •    Market price of the bond
           •    Generic domestic currency swap curve, interpolated using a cubic spline
           •    Generic sterling swap curve, interpolated using a cubic spline
           •    Mid-price basis swap spread.


5.5.6 Delivery of foreign currency bonds to the Bank


(i)        The settlement requirements for different foreign currency securities, including the deadlines and
           settlement conventions, are summarised below. Securities should be delivered to the relevant
           accounts as listed in Appendix XII and XIII.


(ii)       Failure to comply with a delivery deadline may result in cancellation of the transaction by


32
     The Bank will use widely available market pricing services.
                                                                                            3 August 2007   110

           the Bank and potentially a review of OMO Participant status.


(iii)      The SSIs for each Participant will be held in the Btender system. If Participants wish to change
           their SSIs they must contact SCS in writing33 at least one Business Day before the operation is
           due to take place.


(iv)       Securities issued by eligible issuers within the EEA should be delivered through Euroclear no
           later than 15.00 on the settlement date. Securities delivered through Euroclear must be input free
           of payment for delivery to the appropriate Bank of England accounts as specified in Appendix
           VII (c) and (d).


(v)        Securities issued by issuers outside the EEA should be delivered to the Bank’s account at the
           relevant custodian central bank, no later than 15.00 on the settlement date. Securities must be
           delivered free of payment to the appropriate Bank of England accounts as specified in Appendix
           VII (c) and (d).


(vi)       The settlement date for securities is generally T+3. The settlement date for securities issued by
           the United States is T+1. These settlement dates should apply for all securities by the relevant
           issuer, even if the convention is to apply different dates to different maturity securities.


(vii)      Where the settlement date for securities would occur on a non-Business Day, settlement date will
           be deferred until the next Business Day, which is also a working day in the relevant market.


(viii) All securities must be delivered free of payment. No foreign currency payment is provided for
           the bond (see section 5.5.7 for payment of funds).


(ix)       Fractional delivery of foreign currency bonds will not be permitted.




5.5.7 Payment of funds

33
     The letter must be signed by an authorised signatory.
                                                                                    3 August 2007     111



(i)     The Bank pays the sterling amount agreed under the terms of the swap over Btender according to
        Standard Settlement Instructions (see section 2 and section 5.5.6 (iii)).


(ii)    On the settlement date for the outright purchase, securities should be delivered free of payment.
        No foreign currency payment is provided at settlement. The initial foreign currency payment
        from the Participant to the Bank under the swap will not be made as this offsets the foreign
        currency payment from the Bank to the Participant as part of the bond purchase.


(iii)   On the settlement date for the outright purchase, the payment is released only once the Bank has
        taken delivery of the foreign currency bonds and after any collateral called for under the Bank’s
        ISDA Master Agreement and due on the day of the asset swap settlement has been provided. The
        arrangements for collateral are set out in section 5.6.


(iv)    The Bank will not offer compensation in the event of a delay to the release of sterling payment to
        Participants.


5.5.8 Ongoing swaps payments


(i)     Following initial exchange, swaps payments – including at maturity – are made as agreed and set
        out in the confirmation generated by Btender.


(ii)    Participants must make sterling payments to the specified account before 11.00.


(iii)   Under the terms of the swap agreed over Btender the Bank pays the amount agreed according to
        standard settlement instructions (see section 2 and section 5.5.6 (iii)).


(iv)    Payments are released after sterling payments are received.


(v)     Where payment would occur on a non-Business Day or a day which is not a working day in the
        relevant market, payment will be deferred until the next Business Day, which is also a working
        day in the relevant market.


(vi)    The Bank will not offer compensation in the event of a delay to the release of sterling payment to
                                                                                      3 August 2007     112

        Participants.


5.6     Swap exposures and ISDA collateral

(i)     Under the Bank’s ISDA Master Agreement with each Participant, exposures on transactions will
        be valued in sterling and collateralised daily.


(ii)    Collateral provided in accordance with the ISDA Master Agreement shall be referred to as ISDA
        Collateral in these Operating Procedures.


(iii)   Swaps exposures are calculated by the Bank in accordance with the ISDA Master Agreement. As
        stated in the ISDA Master Agreement, the Bank’s calculation is final.


(iv)    Exposures on Swap Transactions are collateralised separately from OMO repo exposures.


5.6.1   Delivery of ISDA collateral to the Bank


(i)     Participants are required to deliver securities free of payment as collateral against any ISDA
        Collateral calls made by the Bank. Collateral arrangements (Eligible Securities, and haircuts) are
        set out in section 7.


(ii)    If a collateral call is made by the Bank, the Participant will be notified by the Bank by 09.30. The
        Bank reserves the right to request additional collateral after the 09.30 deadline. As described
        below, collateral must be settled same day.


(iii)   Details of the securities to be delivered should be sent in by email or fax by the Participant to
        SCS by 10.30 on the day of the call. Participants should also inform SCS if they are delivering
        collateral in Euroclear or Clearstream, through CCBM or through an account with another central
        bank.


(iv)    The Bank will confirm if the collateral offered meets the required Delivery Amount.


(v)     The Bank reserves the right to reject the composition of any proposed delivery of collateral.
                                                                                      3 August 2007     113

(vi)    The terms of the collateral movement must be finalised by 11.30.


(vii)   Settlement of securities to be provided as collateral must be effected by 15.00 on the day the
        collateral is called, as a free of payment delivery.


(viii) Securities may be delivered through CREST, Euroclear, Clearstream, CCBM or an account with
        another central bank to the appropriate Bank of England accounts as specified in Appendix VII.
        CREST DBV may not be delivered as collateral.


(ix)    Failure to comply with any of these deadlines will have consequences under the terms of the
        ISDA Master Agreement but may also result in the Bank withholding payments on any other
        transactions under this Documentation.


(x)     Where the Bank has requested additional collateral and that collateral call has not been met, the
        Bank reserves the right to utilise any securities held by the Bank in the name of the Participant,
        either in RTGS or as pre-positioned securities, or securities due to be returned on maturity of a
        repo transaction, to extinguish the collateral deficit so that the securities would then cease to be
        available for return to the Participant.


5.6.2 Returning ISDA collateral to the Participant


(i)     If a collateral call is made by a Participant to return excess collateral, a request by fax or email
        for the credit support value to be returned must be made to SCS by 09.30. If in agreement, the
        Bank will settle the call by 15:00 the same day.


(ii)    The Bank will confirm the credit support value to be returned by 10.00.


(iii)   The Participant must then specify in writing the securities requested by 10.30, and the Bank will
        confirm the securities to be returned by 11.30. The Bank satisfies the call by redelivering
        Equivalent Collateral Securities, which is the same type, nominal value, description and amount
        as Collateral Securities.


(iv)    Timings for the return of such securities, through the relevant settlement system, are the same as
        for deliveries as set out above.
                                                                                         3 August 2007     114



(v)        The Bank reserves the right to levy charges for holding such securities if the Participant does not
           request delivery immediately, as set out in section 7.


5.6.3 Dividends


(i)        Amounts equivalent to dividends which the Bank is entitled to as holder of securities taken as
           ISDA collateral will be paid to the Participant. Such dividends will be paid according to standard
           settlement instructions and in accordance with the term of the ISDA Master Agreement.


5.6.4 Substitutions


(i)        Participants may exchange Eligible Credit Support in accordance with the terms of the ISDA
           Master Agreement.


(ii)       The Bank may, at its discretion, require a Participant to replace particular securities with other
           securities on a same day basis. This process is referred to in this Documentation as
           ‘substitution’34.


(iii)      The timetable for substitutions is the same as for collateral calls. Participants should contact SCS
           by email or fax before 09.30, if they want to make a substitution. Details of securities to be
           exchanged should be sent by 10.30.


(iv)       The Bank releases the securities to be replaced only after it has received the replacement
           securities. If a Participant wishes to shape a substitution, it may do so with the consent of the
           Bank, and must be agreed as part of the initial instruction.


(v)        Failure to complete a substitution that has been requested by the Bank may result in an ISDA
           collateral deficit, and may result in the Bank withholding payments on any other transactions
           under this Documentation or the ISDA Master Agreement.



34
     Substitutions are referred to as ‘exchanges’ in the ISDA Master Agreement.
                                                                                     3 August 2007    115

(vi)    The Bank also reserves the right to utilise any securities held by the Bank in the name of the
        Participant, either in RTGS or as pre-positioned securities, or securities due to be returned on
        maturity of a repo transaction, to extinguish the ISDA collateral deficit so that the securities
        would then cease to be available for return to the Participant.


(vii)   The Bank reserves the right to terminate or novate any Swap Transactions, subject to the terms of
        the ISDA Master Agreement.


5.7     Contingencies

(i)     The Bank reserves the right to cancel an outright purchase operation, for example in the event
        that the Btender system were unavailable.


(ii)    If Btender is not available prior to a bond purchase OMO or becomes unavailable during the
        OMO, the OMO will be cancelled. If Btender were to become operational later in the day, the
        operation would be run later on the scheduled day if the Bank determines it is able to do so.
        Participants would be given 30 minutes notice of the start time via screen announcement. If the
        operation could not be run on the same day the operation would not be rescheduled for another
        day.


(iii)   If one or more Participants were unable to participate in a bond purchase OMO via Btender due
        to local technical problems, Participants could telephone the Bank and the Bank would enter offer
        details manually into Btender. When entering offers on a Participant’s behalf, the Bank would
        only be able to do so to the extent practicable in the circumstances, and then on the basis of its
        reasonable endeavours and at the risk of the Participant. Participants offering in this way may
        only submit one offer per individual bond. The Bank would not amend offers received by
        telephone, but would cancel offers if the request were received before the close of the tender. If
        the number of Participants seeking to offer in this way were greater than the number that the
        Bank could handle operationally, the tender would be cancelled. If the Bank were satisfied that
        the local technical problems had been resolved, the tender could be run later in the day.
        Participants would be given 30 minutes notice of the start time via screen announcement. If the
        operation could not be run on the same day the operation would not be rescheduled.


(iv)    If SWIFT were not operational more widely, or at the Bank (or the Bank’s DRS, as appropriate)
                                                                                        3 August 2007   116

        the tender would be cancelled, and may be scheduled as set out in (ii) above.


(v)     The Bank reserves the right to cancel a tender at any time before the results are published.


(vi)    In the event that a bond purchase OMO is cancelled the size of short-term repo OMOs would
        increase commensurately. The Bank may however increase the size of bond purchase OMOs in
        subsequent quarters.


(vii)   The Bank reserves the right to terminate or novate any Swap Transactions, subject to and in
        accordance with the terms of the ISDA Master Agreement.
                                                                                                        3 August 2007        117

6         STANDING FACILITIES

(i)        Standing Facilities are available to all banks and building societies that are required under the
           Bank of England Act 1998 to place Cash Ratio Deposits (CRDs) at the Bank35.


(ii)       Overnight standing lending and deposit facilities are available to Participants on demand
           throughout the day, subject to timing constraints imposed by settlement and payment system
           deadlines (see section 6.2). The standing lending facility is provided via the reverse repo of
           Eligible Securities to the Bank and the list of Eligible Securities is the same as for OMOs (see
           section 7). The standing deposit facility is unsecured.


6.1         Rates

(i)        On most days, the rate charged on the standing lending facility is 100bp above Bank Rate and the
           rate paid on the standing deposit facility is 100bp below Bank Rate. On the final day of the
           maintenance period (normally the Wednesday before the MPC’s Thursday rate decision), this
           corridor is narrowed such that the rate charged on the standing lending facility is 25bp above
           Bank Rate, and the rate paid on the standing deposit facility is 25bp below Bank Rate. On MPC
           decision days the Standing Facilities are charged at 100bp around Bank Rate announced at 12
           noon that day, even if the request and/or transaction takes place before then.


6.2        Deadlines and procedures

(i)        Standing Facilities are available all day. In practice, payment and settlement system deadlines
           mean that settlement must be effected by the following times.




35
     In the event that an institution ceases to pay CRDs, following notification from the Bank, access to Standing Facilities will
be withdrawn with immediate effect (or if the Standing Facilities Participant is also a Reserve Account Participant, with
effect from the next maintenance period).
                                                                                                  3 August 2007       118

           Standing deposit facility:


                                               Cash accepted by the Bank until
          From other accounts                  CHAPS cut-off for inter-bank payments, usually 16.2036

          From reserve accounts via CHAPS cut-off for inter-bank payments, usually 16.2037
          CHAPS
          From reserve accounts via For 10 minutes after the CHAPS cut-off, usually from
          non-CHAPS transfer        16.20 to 16.3038


           Standing lending facility:


                                               Securities must be delivered by

          In CREST                             •   Member-to-Member (MTM) DvP: 14.30
                                               •   DBV: 15.45
                                               •   MTM in Free of Payment window: 16.15 (or 16.30 for
                                                   non-CHAPS transfers to reserve accounts)

          In Euroclear/ Clearstream            15.00

          Via CCBM                             15.00

          From RTGS accounts                   16.15 (or 16.30 for non-CHAPS transfers to reserve
                                               accounts)

          Pre-positioned                       16.15 (or 16.30 for non-CHAPS transfers to reserve
                                               accounts)


(ii)       On the last day of the maintenance period, Standing Facilities will be available for
           payments to and from reserve accounts (in the standing lending facility, against collateral
           held in RTGS, pre-positioned or delivered in the CREST free of payment window only)
           until 16.40.


(iii)      Participants should telephone the Bank’s sterling dealing desk (for OMO Participants this should


36
     Depending on arrangements with a Participant’s own CHAPS settlement bank there may be in practice an earlier
operational cut-off.
37
     The Reserve Account Participant will be responsible for effecting this payment by making a CHAPS payment from their
reserve account.
38
     The Reserve Account Participant will be responsible for effecting this payment by requesting LS to debit their reserve
account.
                                                                                         3 August 2007     119

        be on their dedicated line) to request use of the Standing Facilities. The Bank’s dealers will call
        back non-OMO Participants to authenticate requests and confirm the amount.


(iv)    After confirmation of the amount to be borrowed or deposited, Participants should telephone LS
        as soon as possible and in any case within 20 minutes. If using the standing lending facility,
        Participants should state the details of the collateral types to be provided.


(v)     CHAPS or CREST settlement banks may transfer Eligible Securities to the Bank from their
        RTGS collateral accounts at the Bank in order to use the standing lending facility.                All
        institutions may pre-position securities with the Bank for use in the standing lending facility.


(vi)    For the standing lending facility, Participants should send LS details of securities to be delivered
        using the forms at Appendix VII (a) to (d) as soon as possible, but in any event within 60 minutes
        of the request to use the facility, or earlier if constrained by settlement deadlines.


(vii)   Failure to provide details of the securities to be delivered under a transaction may result in
        cancellation of the transaction by the Bank. No securities will be accepted by the Bank, and
        consequently no payment made, until the delivery confirmation has been received.


(viii) For the standing deposit facility, Participants must confirm the details using Appendix IX as soon
        as possible, but in any event within 60 minutes of the request to use the facility, or earlier if
        constrained by payment system deadlines.


6.3     Delivery of securities in the standing lending facility

(i)     Participants are required to deliver securities to the adjusted Market Value of the accepted request
        for funds, i.e. adjusted by the appropriate Margin Ratio (see section 7.8).


(ii)    Participants should deliver securities to the Bank as soon as possible after they have requested
        use of the Standing Facilities and no later than the deadlines set out above in section 6.2.


(iii)   Securities in CREST should be delivered to the CREST Account.


(iv)    Securities to be delivered to the Bank via Euroclear or Clearstream transactions must be input on
        a matching basis for delivery to the appropriate Bank accounts in Euroclear or Clearstream,
                                                                                        3 August 2007    120

        details of which will be provided by LS.


(v)     CCBM securities, and securities being delivered outside CCBM, should be delivered to the
        Bank’s account at the relevant custodian central bank, details of which will be provided by LS.


(vi)    All Standing Facilities Participants will be able to pre-position collateral with the Bank to
        facilitate timely settlement in the standing lending facility. The Bank reserves the right to levy its
        own charges on pre-positioned securities. Where securities are pre-positioned, they will be held
        as detailed in the Terms and Conditions, B.5.7.


(vii)   Where securities have been pre-positioned or are being moved from the Participant’s RTGS
        account, the deadlines given in section 6.2 (i) apply provided that the Participant has arranged the
        transfer of securities with LS in advance, as the time required for transfer of securities ahead of
        the deadline will vary depending on the number of securities to be transferred.


(viii) Subject to prior agreement with LS, Participants may effect delivery of securities sold to the Bank
        by way of repo by making a series of fractional deliveries of such securities. The Bank will
        advance to the Participant the adjusted Market Value of securities as they are delivered, or such
        lesser amount as may be agreed with the Participant, provided that appropriate settlement
        confirmation has been received by the Bank.


(ix)    Delivery details across CREST should conform exactly to details given in Appendix VII (a) and
        (b).


(x)     Delivery details across Euroclear and Clearstream should conform exactly to details given in
        Appendix VII (c) and (d).


(xi)    The Bank may designate from time to time specific links between Euroclear and Clearstream and
        national central securities depositories which may be used for delivery of securities.


(xii)   Delivery details across CCBM should conform exactly to details given in Appendix VII (d).


(xiii) The Bank may designate from time to time other settlement arrangements with national central
        banks which may be used for the delivery of securities.
                                                                                       3 August 2007     121

6.4    Payment of funds in the standing lending facility

(i)    The Bank pays the amount of funds allotted via CREST DvP for eligible CREST securities. For
       other Eligible Securities or pre-positioned CREST securities, provided that sufficient securities
       have been received through the relevant settlement systems and confirmation acceptable to the
       Bank to this effect has been received, the Bank pays funds according to standard settlement
       instructions.


6.5    Maturity/ repurchase of securities

(i)    In the standing lending facility, Participants purchase on maturity securities equivalent to those
       sold to the Bank in the first leg of the repo. On or after receiving payment, including any interest
       owed, the Bank delivers to the Participant securities equivalent to those sold to it.
       Confirmations, such as those required for the Open Market Operations, are not required as
       securities will always be returned from where they were delivered.


(ii)   Deposits should normally be repaid with interest according to standard settlement instructions no
       later than 09.00 the next working day.


6.6    Contingencies

(i)    In the event of an unscheduled MPC meeting, any use of the Standing Facilities before the
       announcement of the meeting (or before the decision itself, if no notice were given) would be
       subject to the Standing Facilities rates prevailing at the time at which the transactions were
       entered into. The rate applied to use of the Standing Facilities after the announcement of the
       decision would normally be 100bp above or below Bank Rate as announced.


(ii)   If Bank Rate were lower than 25 basis points on the final day of the reserve maintenance period,
       the interest paid on the standing deposit facility described in 6.1 (i) would lead to a negative rate
       on the standing deposit facility on that day. And if Bank Rate were lower than 100 basis points on
       any other day it would lead to a negative rate on the standing facility. To avoid this, the standing
       deposit facility rate is bound at zero.
                                                                                      3 August 2007    122

(iii)   If Bank Rate were lower than 25 basis points, the interest charged on the final day of the reserve
        maintenance period on the standing lending facility described in 6.1 (i) would be twice Bank
        Rate. When Bank Rate is below 100 basis points, the rate charged on the standing lending facility
        on other days would be twice Bank Rate.


(iv)    If the CHAPS cut-off time for interbank payments were delayed because of a CHAPS extension
        on a particular day (for example following system difficulties) then, consistent with the objective
        of the extension to ensure that the day’s business could be completed, the Bank would extend the
        availability of the Standing Facilities accordingly. If settlement system timetables were not
        extended, delivery of securities in the standing lending facility may be constrained by the
        delivery deadlines above.


(v)     Following major disruption to the sterling money markets or their supporting infrastructure, the
        money markets may effectively be closed. In those circumstances, the Bank may decide to
        narrow the spread between the standing lending and deposit facility around Bank Rate, including
        to zero, i.e. it would offer to lend overnight (against eligible collateral) and to take deposits
        overnight at Bank Rate.


(vi)    The Bank would endeavour to inform all affected Participants as soon as possible by telephone or
        email of the response it had decided to adopt in a contingency situation.
                                                                                          3 August 2007     123

7      COLLATERAL


7.1        General

Common arrangements for eligible assets, market valuations, and margins and haircuts apply to
collateral provided in the Bank’s Open Market Operations, are set out below.


7.2        Eligible Securities

(i)        In its routine Open Market Operations the following types of securities are eligible as collateral in
           support of repo and Swap Transactions and as margin:
       •      Gilts, including gilt strips
       •      Sterling Treasury bills
       •      HM Government non-sterling marketable debt
       •      Bank of England securities
       •      Sterling-denominated securities issued by European Economic Area (EEA) governments and
              major international institutions (see Appendix VI).
       •      Euro-denominated securities, including strips, issued by EEA central governments and central
              banks and major international institutions (see Appendix VI) where they are eligible for use in
              Eurosystem credit operations.
       •      All domestic currency bonds issued by other sovereigns eligible for sale to the Bank as
              designated by the Bank from time to time.


7.3        Definitions

(i)        Gilts. A gilt is a sterling denominated security issued into CREST by HM Government under the
           National Loans Act 1968 (or earlier similar legislation) and constituting a charge on the National
           Loans Fund with recourse to the Consolidated Fund of the United Kingdom.


(ii)       Sterling Treasury bills are ‘eligible Treasury bills’, issued into CREST, as defined in regulation
           3 of The Uncertificated Securities Regulations 2001, as amended. Treasury bills are sterling
           denominated unconditional obligations of HM Government with recourse to the National Loans
           Fund and the Consolidated Fund which are payable on a specified date and issued at a discount to
           their nominal value.
                                                                                                   3 August 2007       124

(iii)    Non-sterling marketable debt issued by HM Government currently comprises the 2 ¼% 2008
         US dollar denominated bond, which is directly held in Euroclear or Clearstream.


(iv)     Bank of England securities are debt securities issued by the Bank of England and directly held
         in Euroclear or Clearstream.


(v)      Eligible sterling denominated securities issued by EEA governments and major
         international institutions.

         The sterling denominated securities issued by EEA governments and major international
         institutions (see Appendix VI) held in CREST (‘bulldogs’) which may be offered as collateral
         using Member-to-Member delivery or CREST RPO are those detailed in a list maintained by the
         Bank of England published in the Financial Markets section on the Bank’s website
         www.bankofengland.co.uk/markets/money/eligiblesecurities.htm.


         The sterling denominated securities issued into Euroclear and Clearstream by EEA central
         governments and major international institutions (see Appendix VI) which may be offered as
         collateral are detailed in a list maintained by the Bank and published in the Financial Markets
         section on the Bank’s website www.bankofengland.co.uk/markets/money/eligiblesecurities.htm.


(vi)     Eligible euro denominated securities issued by EEA governments and major international
         institutions.

         The bonds and strips denominated in euro issued by EEA central governments and central banks
         and major international institutions (see Appendix VI) which may be offered to the Bank as
         collateral are those which are eligible for use in Eurosystem credit operations. These are detailed
         in a list maintained by the Bank and published in the Financial Markets section on the Bank’s
         website www.bankofengland.co.uk/markets/money/eligiblesecurities.htm. These securities can be
         those issued directly into Euroclear and Clearstream, ‘CCBM securities’, where the central bank
         in the country in which the relevant securities were issued has agreed to act as the Bank’s
         custodian under the Correspondent Central Banking Model (CCBM) 39, or they can be securities

39
     The Correspondent Central Banking Model (CCBM) is the system under which Participants in Bank of England or
Eurosystem money market operations (or intraday liquidity in TARGET) can obtain credit by making use of securities held at
the domestic settlement system of another Eurosystem country. Securities are delivered to the account of the central bank of
that country, which acts as custodian for the central bank granting the credit.
                                                                                      3 August 2007        125

        delivered, via Euroclear or Clearstream, through a link designated by the Bank or through an
        account with a national central bank designated by the Bank


(vii)   Domestic currency denominated securities issued by those sovereigns eligible for outright
        purchase

        All domestic currency bonds issued by other sovereigns which are eligible for outright purchase
        are eligible as collateral. The list of eligible issuers is available on the Bank’s website at
        www.bankofengland.co.uk/markets/money/eligiblesecurities.htm.


7.4     Specific requirements for collateral

(i)     All Eligible Securities must be capable of being settled via at least one of the delivery
        mechanisms described in section 4.4.4, and section 5.6.1.


7.4.1 Repo collateral


(i)     For collateral repurchase transactions, no securities should mature during the life of the
        transaction for which they are delivered. All Eligible Securities, including Margin securities,
        must therefore have a shutting date/ record date for redemption beyond the maturity date of the
        repurchase transaction for which they are used.


(ii)    Eligible sterling securities in CREST may be offered in the form of a Member-to-Member
        delivery, and for repo only CREST RPO, and overnight DBV or a Term DBV. A Term DBV, the
        terms of which are set out in the Terms and Conditions, is in effect a composite transaction
        consisting of a series of overnight DBVs within CREST. (Payment of the premium element of the
        Repurchase Price for each individual transaction is deferred and a separate payment representing
        the aggregate of all such premiums is paid at the maturity of the Term DBV Repo.)


(iii)   Acceptable DBV categories in CREST are (a) all OMO Eligible Securities [ELG]; (b) Treasury
        bills [TSY]; (c) Unstripped British Government Stock [UBG]; and (d) All British Government
        Stock [BGS].


(iv)    ‘Bulldogs’ are not eligible for inclusion within DBV repo either originally or via substitution.
                                                                                         3 August 2007   126

(v)     Gilts, HMG non-sterling marketable debt, Bank of England securities, ‘bulldogs’ and eligible
        sterling and euro-denominated securities issued by EEA governments or international institutions
        (see Appendix VI) offered for repo should be fully paid.


7.4.2 ISDA collateral


(i)     Exposures on transactions governed by the ISDA Master Agreement are collateralised separately
        from OMO repo exposures.


(ii)    Transactions governed by the ISDA Master Agreement may encompass not only asset swaps
        under the Sterling Monetary Framework but also other transactions undertaken by the Bank (for
        example swaps and forward foreign exchange transactions undertaken by the Bank in the course
        of managing its balance sheet). The eligible collateral is the same for all transactions covered
        under the ISDA agreement.


(iii)   A security ceases to be eligible as ISDA collateral when there are less than 10 business days until
        it matures.


7.5     Additional requirements

(i)     The above sovereign and supranational securities are subject to the requirement that the issuer is
        rated Aa3 (on Moody’s scale) or higher by two or more of Moody’s, Standard & Poors, and
        Fitch. This applies to both foreign and domestic currency ratings. Should either foreign or
        domestic currency ratings fail to meet this requirement, none of the issuers’ bonds will be
        eligible.


(ii)    The above Eligible Securities are subject to the continuing requirement that they should be traded
        in liquid markets.


7.6     Concentration limit

(i)     There is a limit on the amount, by Market Value, of securities from a single issuer (excluding HM
        Government and the Bank of England) that a Participant can use as collateral with the Bank at
        any one time. Such securities are only eligible if they fall within the limit.
                                                                                      3 August 2007      127

(ii)    If, at any time, the total securities provided by a single OMO Participant or CHAPS sterling
        settlement bank as collateral in OMOs (including both repos and Swap Transactions) and RTGS
        exceeds £1 billion, the institution must ensure that the securities of any single issuer (other than
        HM Government and the Bank of England) comprise no more than 25% by Market Value of the
        total securities delivered to the Bank. For CHAPS settlement banks that are also OMO
        Participants, two tests will therefore apply – first, to outstanding OMO securities (repo and Swap
        Transactions) held overnight and second, to the sum of outstanding RTGS and OMO securities
        held intra-day.


(iii)   Also, in the case where an OMO Participant and a CHAPS sterling settlement bank are separate
        legal entities but members of the same group, the £1 billion threshold applies to the total value of
        all securities provided to the Bank by the two of them, in both OMO transactions (including fine-
        tuning OMOs and long-term repos) and RTGS intra-day loans. Where the £1 billion threshold is
        exceeded, the OMO Participant and the CHAPS sterling settlement bank must each ensure that
        the total value of the securities of any single issuer (other than HM Government and the Bank of
        England) comprises no more than 25% of the total value of all securities provided by it alone.


(iv)    The £1 billion threshold and the 25% limit are not applied to securities provided in the standing
        lending facility.


(v)     The threshold and limit may be varied at the Bank’s discretion.


(vi)    The Bank conducts regular checks to monitor compliance with the 25% limit, and endeavours to
        inform Participants concerned of any breaches as soon as possible, but it is the responsibility of
        Participants to monitor and adhere to the concentration limit.


(vii)   In the event of an OMO Participant’s holdings of a particular issuer’s securities exceeding the
        limit, the Participant must take immediate steps to rectify the situation. Any breach of the limit
        would attract a collateral interest charge on the Market Value of the securities over the 25% limit,
        at a rate equal to twice Bank Rate. The charge will be calculated from the day on which the
        breach first occurs up to (but not including) the day on which it is rectified. Any breach for a
        period of a day, or less than a day, will attract an interest charge for one day. Such interest
        charges are payable on demand. (The treatment of breaches of the limit in RTGS by CHAPS
        settlement banks is described in the RTGS Reference Manual.)
                                                                                         3 August 2007   128

7.7     Contingencies

(i)     In exceptional circumstances, involving for example stressed conditions in or affecting markets,
        infrastructure or a Participant, the Bank is prepared to receive marketable US Treasury Securities
        as collateral for repo and swaps, in addition to the existing Eligible Securities (see chapter 8). In
        such circumstances, the Bank will make clear to those affected or, as appropriate, to the market as
        a whole, when any such extension came into effect.


(ii)    In such circumstances, the Bank is also prepared to receive US dollar cash as collateral under
        ISDA swaps. This would not be remunerated. In such circumstances, the Bank will make clear to
        those affected or, as appropriate, to the market as a whole, when any such extension came into
        effect.


7.8     Valuation of collateral

(i)     Collateral on repo and swaps will be valued daily by the Bank, and will include additional margin
        or haircuts, as specified in 7.9.


(ii)    On repo transactions, Participants receive cash from the Bank to the exact value of the accepted
        repo bid. Securities must be provided with an adjusted Market Value at least equal to the
        accepted repo bid. Participants are also required, except in the case of overnight transactions, to
        deliver additional securities with an adjusted Market Value at least equal to the full amount of
        interest payable at maturity, as described in section 4.4 (ii). The adjusted Market Value means the
        Market Value, calculated in accordance with Appendix V, divided by the appropriate Margin
        Ratio as set out in 7.9 below.


(iii)   The Repurchase Price of securities sold to the Bank is equivalent to the cash advanced on the
        commencement date of the transaction plus the interest accrued, and will therefore increase daily
        during the life of a transaction according to the repo rate applicable to that transaction.


(iv)    The Bank calculates daily any exposures under its ISDA Master Agreement, as set out in the
        ISDA Master Agreement. It also calculates daily the Credit Support Balance of any securities it
        holds as ISDA collateral, and calls for collateral daily as appropriate.


(v)     Securities held as collateral are valued either directly using observed markets prices or calculated
                                                                                      3 August 2007     129

        prices based on other observed market prices.


(vi)    In valuing any of the above mentioned securities, the Bank reserves the right to use other prices at
        its discretion.


(vii)   Where necessary, valuations are converted to sterling at the exchange rate published by RBS
        fixings page available in Reuters or Bloomberg (on pages RBSGBPFIX01 or RFIX respectively)
        at 16.00 on the previous business day, but the Bank reserves the right to use other prices at its
        discretion.


(viii) Valuation methods and Margins for sale and repurchase transactions and ISDA collateral are set
        out below.


7.9     Repo Margins and Haircuts on ISDA collateral

(i)     On repo transactions, the Bank adjusts daily the Market Value of Equivalent Securities which it is
        due to deliver on the repurchase leg of outstanding repos and also the Market Value of any
        equivalent Margin Securities, by dividing the Market Value of such securities by the appropriate
        Margin Ratio set out below.


(ii)    Securities must be provided to meet the full Credit Support Amount under the ISDA Master
        Agreement, which will include a haircut using the same Margin Ratios set out below (ISDA
        haircuts are the inverse of the Margin Ratios set out below).
                                                                                           3 August 2007    130



        Gilts, and eligible sterling securities issued by EEA governments and international
        institutions:
                                                                                Strips/ zero
                                                                                coupon
                                                                                bonds
                                                                                                1.015
        With a residual maturity of up to one year                           1.005
        With a residual maturity more than one year and up to three years    1.01               1.025
        With a residual maturity more than three years and up to seven years 1.015              1.03
        With a residual maturity of more than seven years                    1.025              1.07

        All non-sterling securities:
                                                                                             Strips/ zero
                                                                                             coupon
                                                                                             bonds
                                                                                             1.045
        With a residual maturity of up to one year                           1.035
        With a residual maturity more than one year and up to three years    1.04            1.055
        With a residual maturity more than three years and up to seven years 1.045           1.06
        With a residual maturity of more than seven years                    1.055           1.10


        Treasury bills in CREST                                                   1.0025


        DBVs in CREST (repo only)
        All OMO Eligible Securities [ELG]                                         1.07
        Treasury bills [TSY]                                                      1.0025
        Unstripped British Government Stocks [UBG]                                1.025
        All British Government Stocks [BGS]                                       1.07


(iii)    The Bank reserves the right to change Margin Ratios at its discretion.


7.9.1 Calculation of Repo Margin Deficit


(i)      The Bank compares daily the total of the adjusted Market Values with the total Repurchase Price
         at maturity for all repos outstanding with a Participant. The Bank normally calls for Margin if the
         total adjusted Market Value falls below the total Repurchase Price at maturity by an amount
         equal to or greater than a Call Trigger Amount which the Bank determines and may change at its
         discretion.
                                                                                     3 August 2007       131

(ii)    The Call Trigger Amount is, for the time being, set at £1,000,000. In this example, where the
        Margin Deficit exceeds the Call Trigger Amount, the Bank would require Margin Securities to be
        delivered having an adjusted Market Value of at least £5,931,069.


(iii)   Additional Margin should take the form of securities having an adjusted Market Value at least
        equal to the Margin deficit.


        Example


              Purchase Price                                £353,000,000

              Interest payable at maturity                     £142,000
              Total Repurchase Price at maturity            £353,142,000


              Market Value of gilts of maturity             £108,389,610
              of more than seven years                      1.025 (appropriate Margin Ratio)
                                                  =         £105,745,961 A


              Market Value of Treasury bills      =      £143,424,081
                                                            1.0025 (appropriate Margin Ratio)
                                                  =      £143,066,415 B
              Market Value of EEA government or central bank
              euro securities, 3-7 years residual
              maturity                                   £102,826,490
                                                            1.045 (appropriate Margin Ratio)
                                                  =      £98,398,555 C
              Total Adjusted Market Value                £347,210,931 (A+B+C)


              Total Repurchase Price at maturity            £353,142,000


              less, Total Adjusted Market Value             £347,210,931 (A+B+C)


              = Margin Deficit                                 £5,931,069



(iv)    The Bank also normally requires delivery of additional Margin Securities sufficient to eliminate
        the Margin deficit should the unadjusted Market Value of securities fall below the total
        Repurchase Price at maturity, even if the Margin deficit is less than the Call Trigger Amount.
                                                                                      3 August 2007     132

(v)     The Bank advises Participants by 09.30 of the amount of any Margin to be called and may at its
        discretion retain Equivalent Securities in lieu of Margin Securities (see section 4.5, and section
        5.6.1).


(vi)    The Bank reserves the right to make Margin calls intra-day.


(vii)   For the purposes of the above paragraphs, payments referred to in section 4.8.1(ii) above
        (deferred payments of accrued premium arising on substitution) are taken into account as though
        they formed part of the Repurchase Price under the replacement transaction.


7.9.2 Calculation of ISDA Credit Support Amount


(i)     In accordance with the terms of the ISDA Master Agreement, the Bank compares daily the total
        ISDA Credit Support Amount with the value of the Participant’s Credit Support Balance as
        adjusted. The Bank normally calls for collateral if the total Credit Support Balance, which
        includes the appropriate haircuts, falls below the total Credit Support Amount by an amount
        equal to or greater than the Minimum Transfer Amount, which the Bank determines and may
        change at its discretion.


(ii)    The Participant’s ISDA Collateral Threshold is zero.


(iii)   The Participant’s Minimum Transfer Amount is currently set at £1,000,000. The rounding
        conventions in the ISDA Credit Support Annex will be applied, i.e. the Delivery Amount and
        Return Amount will be rounded up and down to the nearest integral multiple of £10,000
        respectively.


(iv)    The Bank reserves the right to make collateral calls intra-day.


7.9.3 Calculation of Excess Margin and Collateral


(i)     On repo transactions, if the total adjusted Market Value of securities exceeds the total Repurchase
        Price at maturity for all repos outstanding with a Participant by an amount equal to or greater than
        the Return Trigger Amount, the Participant may make a Margin call on the Bank for securities
        with an adjusted Market Value no greater than the Margin excess. The Participant should notify
                                                                                    3 August 2007     133

       LS by telephone by 09.30. The Return Trigger Amount is an amount which the Bank determines
       and may change at its discretion; it is currently the same as the Call Trigger Amount i.e.
       £1,000,000.


(ii)   For repo transactions, deferred payments are taken into account in the manner described in
       section 7.4.1 above.


7.10 Liability for charges

(i)    Participants are liable in accordance with the Terms and Conditions to reimburse the Bank for all
       costs incurred through holding securities in settlement systems or with other custodians or agents
       or otherwise incurred by the Bank in connection with its provision of the Sterling Monetary
       Framework. The Bank will normally invoice Participants quarterly for such amounts.
                                                                                        3 August 2007     134




8               USE OF US TREASURY SECURITIES AS COLLATERAL IN
EXCEPTIONAL CIRCUMSTANCES

(i)       In exceptional circumstances, (e.g. stressed conditions in or affecting markets, infrastructure or a
          Participant) the Bank may announce any such extension of its Eligible Securities list to include
          US Treasury securities. In the event of any such announcement being made, the Bank would
          announce the start and end of any such temporary extension of its collateral list on its wire
          service pages (see Appendix IV (a)). The Bank would not require substitution of Treasuries at
          the end of the period; rather, outstanding transactions would be allowed to mature.


(ii)      US Treasury securities means securities which are the direct obligations of the United States of
          America. US Treasury securities offered for repo must be fully paid and must have a shutting
          date/ record date for redemption beyond the Maturity Date of the repo transaction for which they
          are used.


(iii)     Participants wishing to deliver US Treasury securities should provide LS or SCS with details of
          the securities, using the form set out in Appendix XIII (a). Participants must also provide duly
          completed United States Internal Revenue Service Forms W-8 or such other tax documentation
          required by the Bank to allow the Bank to make gross payments in respect of the US Treasury
          securities delivered to it.


(iv)      US Treasury securities should be delivered free-of-payment across Fedwire to the Bank of
          England’s account at the Federal Reserve Bank of New York (FRBNY) as soon as possible after
          Fedwire opens for business (08.30 EST).


(v)       US Treasury securities will be valued by the Bank of England using prices observed by the Bank
          and which are available to Participants intending to deliver Treasuries, upon request. Valuations
          are converted to sterling at the exchange rate published by the Bank’s dealing room (the Spot
          Rate) at 16.00 on the previous business day on its wire service pages40. The Margin Ratio is the


40
     Reuters BOE/ERI, Telerate 3874, Bloomberg BOE, ICV/Topic 702
                                                                                       3 August 2007    135

        same as for eligible FX denominated securities (see section 7.8).


(vi)    Subject to prior agreement with LS or SCS, Participants may effect delivery of US Treasury
        securities sold to the Bank by way of repo by making a series of fractional deliveries of such
        securities. The Bank will advance to the Participant the adjusted Market Value of securities as
        they are delivered, or such lesser amount as may be agreed with the Participant, provided that
        appropriate settlement confirmation has been received by the Bank.


(vii)   For repos, provided that sufficient securities have been received across Fedwire to the Bank of
        England’s account at the FRBNY and confirmation acceptable to the Bank to this effect has been
        received, the Bank pays funds via CHAPS according to standard settlement instructions.


(viii) When a repo transaction matures, Participants will repurchase securities equivalent to those sold
        to the Bank in the first leg of the repo. On or after receiving payment, the Bank will instruct the
        FRBNY to deliver to the Participant, free of payment, securities equivalent to those sold to the
        Bank, using the form set out in Appendix XIII(b).


(ix)    The Bank will adjust the Market Value of Equivalent Securities which it is due to deliver on the
        repurchase leg of outstanding repos and also the Market Value of any equivalent Margin
        Securities on the basis set out in section 7.8, using the Margin Ratios applicable to eligible FX-
        denominated securities.


(x)     Participants wishing to substitute collateral for US Treasury securities should notify LS or SCS at
        the earliest opportunity; such requests will be treated on a reasonable endeavours basis.


(xi)    Amounts equivalent to dividends received by the Bank in respect of US Treasury securities will
        be paid to the Participant which sold the relevant securities to the Bank. Such payments will
        normally be made on the dividend payment date but only when the Bank confirms actual receipt
        of the dividend. When a security goes ex-dividend its value (as defined in Appendix V) will fall,
        but the amount of the dividend to be received by the Bank will then be taken into account in
        subsequent revaluations of securities held by the Bank for the purposes of Margin maintenance as
        described above. This treatment will continue until the dividend date when the Bank will pay the
        Participant the amount of the dividend provided any call for Margin by the Bank has been
        satisfied and no event of default has taken place. (See section 5.6.3 on distributions/dividends)
                                                                                     3 August 2007   136

(xii)   In exceptional circumstances, and with prior agreement of the Bank, US Dollar cash can be used
        as collateral under the ISDA Credit Support Annex. The dollar cash should be paid to the Bank of
        England account at the New York Federal Reserve (details available from SCS). No remuneration
        will be paid. The Valuation Percentage for such collateral will be 1/1.03.
                                                                                3 August 2007   137

APPENDICES


Appendix I: Summary of interest rates on the Bank’s facilities

Rate charged on CHAPS settlement bank reserve if Bank Rate > 200bp, twice Bank Rate
account overdrafts                                if Bank Rate < 200bp, Bank Rate + 200bp
Rate charged on any shortfall of average reserves if Bank Rate Rate > 200bp, Bank Rate
below lower end of target range                  if Bank Rate < 200bp, 200bp

Rate charged on standing lending facility during if Bank Rate > 100bp, Bank Rate + 100bp
maintenance period                               if Bank Rate < 100bp, twice Bank Rate

Rate charged on standing lending facility on final If Bank Rate > 25bp, Bank Rate+ 25bp
day of maintenance period                          if Bank Rate < 25bp, twice Bank Rate

Rate paid on reserve balances up to upper limit Bank Rate
on reserves band
Rate paid on standing deposit facility on final if Bank Rate > 25bp, Bank Rate - 25bp
day of maintenance period                       if Bank Rate < 25bp, zero
Rate paid on standing deposit facility during if Bank Rate > 100bp, Bank Rate - 100bp
maintenance period                               if Bank Rate < 100bp, zero

Rate paid on any excess of average reserves Zero
above upper end of target range
                                                                                    3 August 2007   138

Appendix II: Table of scheduled announcements for Bank of England
sterling operations

The Bank will make the following scheduled announcements, on its website or on its wire service pages.

Annually


(usually in September following the publication of the schedule of MPC meetings)
Dates of maintenance periods.
Scheduled open market operations (dates and maturities) for following year.


(usually on the first working day in January)
Planned aggregate size of bond-purchase OMOs for forthcoming year.


Quarterly


(3pm on the first working day of each calendar quarter)
Size of each long-term repo OMO for forthcoming quarter
Size of each bond purchase OMO for forthcoming quarter.
Update of planned aggregate size of bond-purchase OMOs for remainder of the year.


Monthly


(11.00 am on the day before the start of a new maintenance period)
Aggregate reserves target and range for the forthcoming maintenance period.


(11.00 am one week before a long-term repo OMO)
Size of long-term repo OMO (overall and at each maturity).


(11.00 am one week before a bond-purchase OMO)
Size of bond-purchase OMO and details of individual bonds to be purchased.


(10.40am on day of long-term repo OMO)
Results of long-term repo OMO.
                                                                                    3 August 2007    139

(As soon as practicable after 2.45pm on day of bond-purchase OMO)
Results of bond-purchase OMO.


(12 noon on the day of the scheduled MPC decision)
Announcement of MPC interest rate decision.


Weekly


(9.00 am on the day of OMOs, usually Thursday)
Forecast of the banking system’s liquidity need (aggregate target reserves for that week plus the banking
system’s net liquidity need due to other flows between the banking system and the Bank).
Size of short-term OMO (forecast liquidity need plus error in previous forecast).


(10.10am on the day of OMOs or 12.25 pm on scheduled MPC decision days, usually Thursday)
Results of short-term OMO.


On the final day of the maintenance period


(9.30 am)
Size of fine-tuning OMO (error in previous forecast).


(10.10am)
Results of fine-tuning OMO.


Daily


(10.00 am on most days, 9.00 am on OMO days except for 9.30 am on the day of a scheduled fine-tuning
OMO)
That day’s forecast holdings of aggregate reserves.
The previous day’s aggregate actual holdings of reserves.
The previous day’s error in the Bank’s forecast of aggregate reserves.
Average of reserves held thus far in maintenance period.
Residual average reserves requirement.
The previous day’s use of standing lending facility, in aggregate.
                                                                                      3 August 2007        140

The previous day’s use of standing deposit facility, in aggregate.
In the final week of a maintenance period, the expected size of the end-of-maintenance-period fine tune.

Current interest rates on standing facilities.
                                                                                       3 August 2007   141



Appendix III: Summary daily timetable

The table below summarises the timetable, in normal circumstances, for the facilities described in these
Operating Procedures:


                 Normal day during         Normal day during         Final    day      of
                 Maintenance Period        Maintenance period        maintenance period
                 without OMO               with OMO
Mornings / early Publication of that       Publication of size of    Publication of size of
afternoons       day’s forecast of         short-term OMOs and       fine tuning OMO,
                 aggregate holdings        daily forecast and        and daily forecast
                 of reserves and           previous outturn for      and previous outturn
                 previous       day’s      aggregate reserves        for aggregate
                 actual     aggregate      (9.00am)                  reserves (9.30am)
                 reserves (10.00am)
                                           Weekly one week           Overnight fine-
                                           maturity OMO              tuning OMO
                                           (12.15pm on MPC           (10.00am)
                                           days; 10.00am on
                                           non-MPC days)             Publication of target
                                                                     aggregate reserves
                                           OR                        for next maintenance
                                                                     period (11.00am)
                                           Monthly long-term
                                           repo OMO (10.00am)

                                           OR

                                           Monthly bond purchase
                                           OMO (2.15pm)


16.20              Close of CHAPS for interbank payment

                   Close of the Bank’s standing facilities (except for transfers to/from
                   scheme members’ reserves accounts)

                   Close for funding/defunding of scheme members’ reserves accounts
                   (except for use of the Bank’s standing facilities)
16.30              Close of standing facilities for transfers       Close of RTGS for
                   to/from scheme members’ reserves accounts payments between
                                                                    settlement banks
                                                                    only
16.40                                                               Close of standing
                                                                    facilities for transfers
                                                                    to/from scheme
                                                                    members’ reserve
           3 August 2007   142

accounts
                                                          3 August 2007   143

Appendix IV (a): Bank of England wire service pages for Sterling Monetary
Framework


Reuters       BOE/MONEYOPS1-6
Telerate      3868 - 3873
ICV/Topic     44731 - 44736
Bloomberg     BOE
                                                                                       3 August 2007     144

Appendix IV (b): Examples of Bank of England screen announcements

Publication type         Daily Publications
Date                     dd-mm-yyyy
Desc                                                                       Value
Aggregate reserves forecast for today                                           -
Previous day’s aggregate holdings of reserves                                   -
Previous day’s aggregate reserves forecast error                                -
Average aggregate reserves held to date in maintenance                          -
period                                                                          -
Residual average aggregate reserve requirement                                  -
Excess reserves                                                                 -
Previous day’s use of standing lending facility on aggregate                    -
Previous day’s use of standing deposit facility on aggregate                    -
                                                                                -
Current standing facility rate- loans                                           -
deposits


Under normal circumstances:
(i) The expected size of a scheduled fine-tune operation will be published daily from the Friday prior to the
operation itself.
(ii) On MPC days, the current Standing Facility rates are not published until after the MPC announcement at
12.00.



Publication type         Weekly Pre-Operation
Date                     dd-mm-yyyy
Desc                                                                       Value
Forecast liquidity shortage                                                     -
Average forecast level of notes                                                 -
Average forecast level for other autonomous factors                             -
Forecast average reserves                                                       -
Forecast error (since previous operation)                                       -
Amount of maturing OMOs                                                         -
Size of OMO offered                                                             -




Publication type         Weekly Post-Operation
                                                           3 August 2007   145


Date                   dd-mm-yyyy
Desc                                               Value
Size of OMO bid                                        -
Amount of OMO allocated                                -
Percentage of OMO bid allocated                        -
Aggregate reserves forecast for today (post OMO)       -
                                                       -
                                                       -
                                                       -
                                                       -
                                                       -
                                                                                   3 August 2007    146


Publication type          Monthly Publications
Date                      dd-mm-yyyy
Desc                                                                    Value
Maintenance period dd-mm-yyyy to dd-mm-yyyy                                  -
Aggregate reserve target                                                     -
Range around target – lower bound – upper bound                              -




Under normal circumstances the Monthly Publication is normally done on the final day of each Maintenance
Period.



Publication type          Fine-tune Pre-Operation
Date                      dd-mm-yyyy
Desc                                                                    Value
Size of fine-tune offered (negative indicates a reserves drain)              -
o/w excess reserves                                                          -
o/w autonomous factors                                                       -
o/w use of standing facilities




Publication type          Fine-tune Post-Operation
Date                      dd-mm-yyyy
Desc                                                                    Value
                                                                             -
Size of fine-tune bids/offers                                                -
Amount allocated in fine-tune                                                -
Percentage of OMO bid/offer allocated
Aggregate reserves forecast (post OMO)
Cumulative reserves forecast (post OMO)
Cumulative reserves required to meet upper end of target
range
Cumulative reserves target
Cumulative reserves required to meet lower end of target
range
                                                                                          3 August 2007   147


Publication type                 Monthly long-term repo pre-operation
Date                             dd-mm-yyyy
 Date of Operation                                   08/03/2007

 Time for submission of offers                      10:00AM - 10:30AM

 Settlement Date                                     09/03/2007

 Auction Type                                       Variable Rate Tender

 Allotment Method                                    Discriminatory Price Basis

 Minimum Offer Amount                                Stg 5mn

 Multiples of                                        Stg 1mn



 Total size of operation (Stg mn)                    1000

 3 mth (91 days) maturing on 08/06/07 (stg mn)       500

 6 mth (182 days) maturing on 07/09/07 (stg mn)      200

 9 mth (273 days) maturing on 07/12/07 (stg mn)      200

 12 mth (364 days) maturing on 07/03/08 (stg mn)     100




Publication type                 Monthly long-term repo post-operation
Date                             dd-mm-yyyy
Desc                                                                              Value
x mths maturing on xx/xx/xx                                                           -
Amount on offer (Stg mn)                                                              -
Total offers received (Stg mn)                                                        -
Amount allotted (Stg mn)                                                              -
Cover Ratio                                                                           -
Lowest accepted rate                                                                  -
Percentage allotted at lowest accepted rate                                           -
Highest accepted rate                                                                 -
Weighted average accepted rate                                                        -
Tail                                                                                  -



Publication type                 Quarterly bond purchase announcement
Date
Desc                                                                  Value
Sterling Bond Purchases
Date of Operation
Total purchase size
                                                                                        3 August 2007   148


Date of Operation
Total purchase size


Date of Operation
Total purchase size


Swapped Foreign Bond Purchases
Date of Operation
Total purchase size
Eligible issuers


Date of Operation
Total purchase size
Eligible issuers


Date of Operation
Total purchase size
Eligible issuers




Publication type        Monthly bond purchase pre-operation
Date                    dd-mm-yyyy
Desc                                                                          Value
Date of operation                                                           xx/xx/xx
Time for submission of offers                                      2:15pm - 2:45pm
Settlement date                                                             xx/xx/xx


Auction type                                                   Variable price tender
Allotment method                                           Discriminatory price basis
Minimum offer amount                                                           £5mn
Multiples of                                                                   £1mn


Total size of operation (£mns)                                                      -
All bonds will be purchased on relative value within the                            -
maturity sector.                                                                    -
                                                                                    -
                                                                                              3 August 2007      149


Maturity range 20XX-20XX (Stg mn)           XXX                                        -
Eligible stocks
UKT X% 200XX - min of Stg XXXmn and a max of Stg XXXmn

UKT X% 20XX   - min of Stg XXXmn and a max of Stg XXXmn


Maturity range 20XX-20XX (Stg mn)            XXX
Eligible stocks
UKT X% 20XX - min of Stg 500mn and a max of Stg XXXmn

UKT X% 20XX - min of Stg XXXmn and a max of Stg XXXmn



Maturity range 20XX-20XX (Stg mn)            XXX
Eligible stocks
UKT X% 20XX - min of Stg XXXmn and a max of Stg XXXmn

UKT X% 20XX - min of Stg XXXmn and a max of Stg XXXmn




Publication type           Monthly bond purchase post-operation
Date                       dd-mm-yyyy
Total amount of offers received: £XXXmn
Total amount of offers accepted: £XXXmn
Cover ratio: X.X


Bonds purchased
Description       Total         Total    offers    Weighted        Lowest     % allotted at     Highest       Tail
                  offers        accepted           average price   accepted   lowest            price
                  received                                         price      accepted
                                                                              price
UK Treasury       £XXXmn        £XXXmn             X%              X%         X%                X%            X%
XXX




Publication type           Monthly swapped foreign bond purchase pre-operation
Date                       dd-mm-yyyy
Desc                                                                             Value
                                                                                                   3 August 2007     150


Date of operation                                                                    xx/xx/xx
Time for submission of offers                                               2:15pm - 2:45pm
Settlement date                                                                      xx/xx/xx


Auction type                                                             Variable rate tender
Allotment method                                                     Discriminatory rate basis
Minimum offer amount                                                                    £5mn
Multiples of                                                                            £1mn


Total size of operation (£mns)                                                                 -
All bonds will be purchased on relative value within the                                       -
maturity sector.                                                                               -
                                                                                               -
Maturity range 20XX-20XX (Stg mn)             XXX                                              -
Eligible stocks
XXXXX 200XX - min of Stg XXXmn and a max of Stg XXXmn

XXXXX 20XX     - min of Stg XXXmn and a max of Stg XXXmn


Maturity range 20XX-20XX (Stg mn)              XXX
Eligible stocks
XXXXX 20XX - min of Stg 500mn and a max of Stg XXXmn

XXXXX 20XX - min of Stg XXXmn and a max of Stg XXXmn



Maturity range 20XX-20XX (Stg mn)              XXX
Eligible stocks
XXXXX 20XX - min of Stg XXXmn and a max of Stg XXXmn

XXXXX 20XX - min of Stg XXXmn and a max of Stg XXXmn




Publication type             Monthly swapped foreign currency bond purchase post-operation
Date                         dd-mm-yyyy
Total amount of offers received: £XXXmn
Total amount of offers accepted: £XXXmn
Cover ratio: X.X


Bonds purchased
Description        Total          Total    offers    Weighted         Lowest          % allotted at   Highest      Tail
                   offers         accepted           average yield    accepted        lowest          Yield
                                                    3 August 2007    151


        received                 yield   accepted
                                         yield
XXXXX   £XXXmn     £XXXmn   X%   X%      X%            X%           X%
                                                                                        3 August 2007        152

  Appendix V: Valuation methods, haircuts and margins for collateral

The Bank normally uses the valuation methods shown below, but reserves the right to use more
recent prices. If the Bank chooses to use more recent prices, Participants will be told of the changes
to the method of valuation when they phone LS or SCS to confirm the trade callover.



             SECURITY                    MARGIN RATIO                 VALUATION METHOD


   British Government fixed rate                           British Government fixed rate securities held
   securities and eligible sterling                        as collateral are valued either directly using
 denominated securities (bulldogs)                         observed market prices or calculated prices
in CREST with a residual maturity                          based on other observed market prices.
                  of:

             up to 1 year                   1.005          Bulldogs held as collateral are valued either
                                                           directly using observed market prices or
                                                           calculated prices based on other observed
                                                           market prices.

 more than 1 year and up to 3 years          1.01

more than 3 years and up to 7 years         1.015

         More than 7 years                  1.025



Zero coupon bonds and bond strips                          Securities held as collateral are valued either
  in CREST, and zero coupon and                            directly using observed market prices or
 stripped eligible sterling securities                     calculated prices based on other observed
                                            1.015
 issued by EEA Governments and                             market prices.
  international institutions with a
        residual maturity of:

             up to 1 year

 more than 1 year and up to 3 years         1.025

more than 3 years and up to 7 years          1.03

         more than 7 years                   1.07
                                                                                       3 August 2007       153




          DBV in CREST                                                        N/A

All OMO eligible OMO securities              1.07
               [ELG]

       Treasury bills [TSY]
                                            1.0025
  Unstripped British Government
                                            1.025
           Stocks [UBG]

  All British Government Stocks
                                             1.07
               [BGS]

 Sterling Treasury bills in CREST           1.0025        Sterling Treasury bills held as collateral are
                                                         valued either directly using observed market
                                                           prices or calculated prices based on other
                                                                    observed market prices.




            SECURITY                    MARGIN RATIO                VALUATION METHOD

    Eligible sterling denominated                        Securities held as collateral are valued either
  international securities issued by                       directly using observed market prices or
 EEA governments or international                      calculated prices based on other observed market
institutions with a residual maturity                                        prices.
                   of:

            up to 1 year                   1.005

More than 1 year and up to 3 years          1.01

More than 3 years and up to 7 years        1.015

       of more than 7 years                1.025


HMG non-sterling marketable debt,                        Securities held as collateral are valued either
  Bank of England Euro securities                          directly using observed market prices or
   and eligible euro denominated                       calculated prices based on other observed market
     securities issued by EEA                                                prices.
 governments and central banks or
  international institutions with a
        residual maturity of:              1.035
            up to 1 year

More than 1 year and up to 3 years          1.04
                                                                                        3 August 2007        154


More than 3 years and up to 7 years       1.045

        More than 7 years                 1.055


 Eligible euro denominated zero                            Securities held as collateral are valued either
coupon bonds and strips issued by                            directly using observed market prices or
  EEA governments and central                            calculated prices based on other observed market
banks or international institutions                                            prices.
   with a residual maturity of:
           up to 1 year
                                          1.045

More than 1 year and up to 3 years        1.055

More than 3 years and up to 7 years        1.06
        More than 7 years                  1.10



  ISDA haircuts are the inverse of the margin ratios set out above.


  The Valuation Percentage for US Dollar cash as collateral under the ISDA Credit Support Annex is
  1/1.03.
                                                                   3 August 2007   155


Appendix VI: International Institutions

African Development Bank

Asian Development Bank

Council of Europe Social Development Fund

European Atomic Energy Community

European Bank for Reconstruction and Development

European Community

European Coal and Steel Community

European Investment Bank

Inter-American Development Bank

International Bank for Reconstruction and Development/World Bank

International Finance Corporation

Nordic Investment Bank
CREST STERLING COLLATERAL                                                                                                                                              CHAPS                                                                                 APPENDIX VII(a) 156
                                                                                                                                                                       RESERVE ACCOUNT (RTGS)

        PARTICIPANT NAME:                                                                                                           REPO START DATE:                                                                        BANK OF ENGLAND CREST ID:
              CONTACT NAME:                                                                                                 REPO MATURITY DATE:                                                                                     PARTICIPANT CREST ID:
          CONTACT NUMBER:                                                                                                       *PAYMENT METHOD:
                                                                                                                       * Where securities are delivered in the CREST free of payment window for standing facilities, please state
                                                                                                                       whether funds are to be paid to your CHAPS or RTGS RESERVE ACCOUNT.


We refer to the Bank's telephone confirmation that, as a result of the acceptance of bids under the money market operations specified above, we are to enter today into repo transactions with the Bank for the maturity and the aggregate purchase
prices for the maturity specified below. We hereby notify the Bank that the securities to be sold under those repo transactions, and the purchase prices for those securities, are to be as specified below. This notice is given under the Bank's
Operating Procedures relating to its Operations in the sterling money markets and the repo transactions to which it relates are subject to the Terms and Conditions between us and the Bank and to those Operating Procedures.


   TRANS'N
                          PURCHASE PRICE                         RATE                 REPURCHASE PRICE                                                                                                 TRANSACTION TYPE CODES
    TYPE
                                                                                                                                                                                          MM                        MEMBER TO MEMBER
                                                                                                                 -
                                                                                                                                                                                          RPO                       REPO FUNCTIONALITY
                                                                                                                 -
                                                                                                                                                                                                        COLLATERAL TYPE CODES
                                                                                                                 -
                                                                                                                                                                                          TSY                       TREASURY BILLS
                                                                                                                 -
                                                                                                                                                                                          BGS                       BRITISH GOV'T STOCKS
                                          TOTAL REPURCHASE PRICE                                                 -
                                                                                                                                                                                          BUL                       BULLDOGS



   TRANS'N          COLLATERAL                                                                                            SOURCE OF                                                                                  MARGIN
                                                     ISIN CODE                              NOMINAL                                                   PRICE                     MARKET VALUE                                        ADJUSTED MARKET VALUE    CREST CONSIDERATION
    TYPE               TYPE                                                                                               SECURITIES                                                                                  RATIO

                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                            -                                         -
                                                                                                                                                                                                                          TOTAL                       -                       -


PAYMENT NETTING INFORMATION:                                           CASH TO BE REPAID TO BANK OF ENGLAND FROM MATURING REPO:                                                                                                                             PARTICIPANT
                                                                                                          CASH TO BE PAID BY BANK OF ENGLAND:                                                                                                               MATURITY
                                                                                                                                                                                                                                                            PRE POS
NOTE 1: Adjusted Market Value of collateral should be equal to or greater than the Repurchase Price.                                                                                                                                                        MARGIN
NOTE 2: CREST Consideration should be equal to or less than the Adjusted Market Value of each line of security.
NOTE 3: Total CREST Consideration should equal Purchase Price.
NOTE 4: For further information regarding the calculation and/or use of netted payments please see the first tab of this spreadsheet titled 'Information Sheet'.
CREST DBV STERLING COLLATERAL                                                                                                                                                                                                           APPENDIX VII(b) 157


   PARTICIPANT NAME:                                                                                                           REPO START DATE:                                                    BANK OF ENGLAND                          PARTICIPANT
         CONTACT NAME:                                                                                                     REPO MATURITY DATE:                                          SWIFT ID                     BKENGB2L
     CONTACT NUMBER:                                                                                                                                                                    EUROCLEAR NO.                92696
                                                                                                                      BANK OF ENGLAND CREST ID:                                         CLEARSTREAM NO.              78042
                                                                                                                           PARTICIPANT CREST ID:



We refer to the Bank's telephone confirmation that, as a result of the acceptance of bids under the round of money market operations specified above, we are to enter today into repo transactions with the Bank for the maturities and the aggregate purchase
prices for the maturity specified below. We hereby notify the Bank that the securities to be sold under those repo transactions, and the purchase prices for those securities, are to be as specified below. This notice is given under the Bank's Operating
Procedures relating to its operations in the sterling Money Market and the repo transactions to which it relates are subject to the Terms and Conditions between us and the Bank and to those Operating Procedures.



  COLLATERAL TYPE                            PURCHASE PRICE                                 RATE                        REPURCHASE PRICE                                                                     COLLATERAL TYPE CODES

                                                                                                                                            -                                            DBV UBG                      UNSTRIPPED BRITISH GOV'T STOCKS

                                                                                                                                            -                                            DBV BGS                      ALL BRITISH GOV'T STOCKS

                                                                                                                                            -                                            DBV TSY                      TREASURY BILLS

                                                                      TOTAL REPURCHASE PRICE                                                -                                            DBV ELG                      ALL OMO ELIGIBLE SECURITIES



  COLLATERAL TYPE                             MARKET VALUE                           MARGIN RATIO                     ADJUSTED MARKET VALUE                                                       DELIVERER (S) OF €EEA SECURITIES
                                                                                                                                            -                                          CCBM COUNTRY                             DELIVERING AGENT

                                                                                                                                            -
                                                                                                                                            -
                                                                                                                                            -
                                                                                                    TOTAL                                   -


DBV INTEREST COLLATERAL DETAILS
                                                                                        SOURCE OF                EXCHANGE
         ISIN CODE                                 NOMINAL                                                                          PRICE                MARKET VALUE                            MARGIN                    ADJUSTED MARKET VALUE
                                                                                        SECURITIES                 RATE
                                                                                                                                                                                   -                                                                             -
                                                                                                                                                                                   -                                                                             -
                                                                                                                                                                                   -                                                                             -
                                                                                                                                                                                   -                                                                             -
                                                                                                                                                                                   -                                                                             -
                                                                                                                                                                                   -                                                                             -
                                                                                                                                                                                                           TOTAL                                                 -


                                                                                                                                                                        TOTAL ADJUSTED MARKET VALUE                                                              -


NOTE 1 : Total Adjusted Market Value of collateral should be equal to the Total Repurchase Price.                                                                                                                                     PARTICIPANT
NOTE 2 : If GBP denominated collateral is being used for DBV Interest Collateral please enter Exchange Rate as 1.0.                                                                                                                   MATURITY
EEA STERLING COLLATERAL                                                                                                                                                                                            APPENDIX VII(c) 158
                                                                                                                   CHAPS

                                                                                                                   RESERVE ACCOUNT (RTGS)                                                       BANK OF ENGLAND         PARTICIPANT
PARTICIPANT NAME:                                                                     REPO START DATE:                                                                 EUROCLEAR NO.                 92696
CONTACT NAME:                                                                  REPO MATURITY DATE:                                                                     CLEARSTREAM NO.               78042
CONTACT NUMBER:                                                                    *PAYMENT METHOD:
                                                                              * PLEASE STATE WHETHER FUNDS ARE TO BE PAID TO YOUR CHAPS ACCOUNT OR TO YOUR RTGS RESERVE ACCOUNT.




We refer to the Bank's telephone confirmation that, as a result of the acceptance of bids under the money market operations specified above, we are to enter today into repo transactions with the Bank for the maturity and the aggregate
purchase prices for the maturity specified below. We hereby notify the Bank that the securities to be sold under those repo transactions, and the purchase prices for those securities, are to be as specified below. This notice is given under
the Bank's Operating Procedures relating to its Operations in the sterling money markets and the repo transactions to which it relates are subject to the Terms and Conditions between us and the Bank and to those Operating Procedures.


  COLLATERAL TYPE                          PURCHASE PRICE                                   RATE                              REPURCHASE PRICE
            £ EEA                                                                                                                                                  -




                                                                                                                                                                                       MARGIN
         ISIN CODE                              NOMINAL                        SOURCE OF SECURITIES                              PRICE                         MARKET VALUE                           ADJUSTED MARKET VALUE
                                                                                                                                                                                        RATIO

                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                               -                                                           -
                                                                                                                                                                            TOTAL                                                          -


PAYMENT NETTING INFORMATION:                                    CASH TO BE REPAID TO BANK OF ENGLAND FROM MATURING REPO:                                                                                          PARTICIPANT
                                                                                                   CASH TO BE PAID BY BANK OF ENGLAND:                                                                            MATURITY
                                                                                                                                                                                                                  PRE POS
                                                                                                                                                                                                                  MARGIN
NOTE 1: EEA - Sterling Denominated securities issued by EEA Governments and Major International institutions (settled in Euroclear/Clearstream)                                                                   IDL
NOTE 2: Adjusted Market Value of collateral should be equal to or greater than the Repurchase Price.
NOTE 3: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.
NON STERLING COLLATERAL                                                                                                                                                                                        APPENDIX VII(d) 159
                                                                                                                           CHAPS

                                                                                                                           RESERVE ACCOUNT (RTGS)                                        BANK OF ENGLAND         PARTICIPANT

   PARTICIPANT NAME:                                                                          REPO START DATE:                                                      SWIFT ID            BKENGB2L

         CONTACT NAME:                                                                 REPO MATURITY DATE:                                                          EUROCLEAR NO.       92696
     CONTACT NUMBER:                                                                       *PAYMENT METHOD:                                                         CLEARSTREAM NO. 78042
                                                                           * PLEASE STATE WHETHER FUNDS ARE TO BE PAID TO YOUR CHAPS ACCOUNT OR TO YOUR RTGS RESERVE ACCOUNT.


We refer to the Bank's telephone confirmation that, as a result of the acceptance of bids under the money market operations specified above, we are to enter today into repo transactions with the Bank for the maturity and the
aggregate purchase prices for the maturity specified below. We hereby notify the Bank that the securities to be sold under those repo transactions, and the purchase prices for those securities, are to be as specified below. This notice
is given under the Bank's Operating Procedures relating to its Operations in the sterling money markets and the repo transactions to which it relates are subject to the Terms and Conditions between us and the Bank and to those
Operating Procedures.

                                                                                                                                                                                        DELIVERER (S) OF €EEA SECURITIES
  COLLATERAL TYPE                         PURCHASE PRICE                            RATE                          REPURCHASE PRICE                                                      CCBM COUNTRY         DELIVERING AGENT

EURO EEA SECS                                                                                                                                        -

BOE EURO PAPER                                                                                                                                       -

HMG NON £ DEBIT                                                                                                                                      -
                                                            TOTAL REPURCHASE PRICE                                                                   -


                                                                               SOURCE OF                EXCHANGE                                                                                               ADJUSTED MARKET
         ISIN CODE                             NOMINAL                                                                                PRICE                        MARKET VALUE                 MARGIN
                                                                               SECURITIES                 RATE                                                                                                      VALUE

                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                    -                                                 -
                                                                                                                                                                                                     TOTAL                            -


PAYMENT NETTING INFORMATION:                                        CASH TO BE REPAID TO BANK OF ENGLAND FROM MATURING REPO:                                                                                 PARTICIPANT
                                                                                              CASH TO BE DELIVERED BY BANK OF ENGLAND:                                                                       MATURITY
                                                                                                                                                                                                             PRE POS
NOTE 1: Adjusted Market Value of collateral should be equal to or greater than the Repurchase Price                                                                                                          MARGIN
NOTE 2: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.                                             IDL
CREST DBV STERLING COLLATERAL - LIQUIDITY WITHDRAWAL FINE TUNING                                                                                                                                                          APPENDIX VIII 160


   PARTICIPANT NAME:                                                                                          REPO START DATE:                                                  BANK OF ENGLAND CREST ID:
       CONTACT NAME:                                                                                     REPO MATURITY DATE:                                                           PARTICIPANT CREST ID:

    CONTACT NUMBER:




We refer to the Bank's telephone confirmation that, as a result of the acceptance of bids under the round of money market operations specified above, we are to enter today into repo transactions with the Bank for the maturities and the aggregate
purchase prices for the maturity specified below. We hereby notify the Bank that the securities to be sold under those repo transactions, and the purchase prices for those securities, are to be as specified below. This notice is given under the
Bank's Operating Procedures relating to its operations in the sterling Money Market and the repo transactions to which it relates are subject to the Terms and Conditions between us and the Bank and to those Operating Procedures.




  COLLATERAL TYPE                      PURCHASE PRICE                           RATE                   REPURCHASE PRICE                                                                              COLLATERAL TYPE CODE

         DBV UBG                                                                                                                  -                                                    DBV UBG           UNSTRIPPED BRITISH GOV STOCKS




  COLLATERAL TYPE                       MARKET VALUE                      MARGIN RATIO             ADJUSTED MARKET VALUE

         DBV UBG                                                  0.00                  1.0250
STANDING FACILITY - DEPOSIT                                                                                                                                                 APPENDIX IX 161



PARTICIPANT NAME:




CONTACT NAME:




CONTACT NUMBER:




DATE:




           DEPOSIT START DATE                                    DEPOSIT MATURITY DATE                                        DEPOSIT AMOUNT           RATE       DEPOSIT REPAYMENT AMOUNT

                                                                                                                                                                                        -




                                                                                                                                                                  YES


                                                                                                                                                                  NO


DEPOSIT PAYMENT TO BANK OF ENGLAND TO BE MADE VIA:                                                                 1) CHAPS TRANSFER INITIATED BY PARTICIPANT:

                                                                                                                   2) WE HEREBY INSTRUCT THE BANK OF ENGLAND TO
                                                                                                                   DEBIT OUR RESERVE ACCOUNT 1:

                                                                                                                                                                  CHAPS

                                                                                                                                                                  RTGS

                                                    REPAYMENT TO BE MADE TO PARTICIPANT'S CHAPS ACCOUNT OR RTGS RESERVE ACCOUNT:




NOTE 1: Ordinarily the Bank will only accept an instruction to debit a Participant's Reserve Account after the CHAPS system closes.
MARGIN TRANSFER TO BANK                                                                                                                      APPENDIX X(a) 162


  CONTACT NAME:                                                           DATE:


CONTACT NUMBER:                                              PARTICIPANT NAME:




      STERLING COLLATERAL TYPE CODES                                 DELIVERER(S) OF €EEA SECURITIES
       TSY        TREASURY BILLS                      CCBM COUNTRY                 DELIVERING AGENT                       BANK OF ENGLAND       PARTICIPANT
       BGS        BRITISH GOV'T STOCKS                                                                  SWIFT ID             BKENGB2L
       BUL        BULLDOGS                                                                              EUROCLEAR NO.          92696
                  £ SECURITIES SETTLED IN
      £EEA
                  EUROCLEAR/CLEARSTREAM                                                                 CLEARSTREAM NO.        78042
    NON-STERLING COLLATERAL TYPE CODES                                                                  CREST ID
EURO EEA SECS     E EEA
BOE EURO PAPER    BOE
HMG NON £ DEBIT   HMG




STERLING COLLATERAL
                                                       SOURCE OF                                                          MARGIN
COLLATERAL TYPE           ISIN CODE         NOMINAL                                      PRICE         MARKET VALUE                    ADJUSTED MARKET VALUE
                                                       SECURITIES                                                          RATIO

                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                           TOTAL                              -


NON STERLING COLLATERAL
                                                       SOURCE OF     EXCHANGE                                             MARGIN
COLLATERAL TYPE           ISIN CODE         NOMINAL                                      PRICE         MARKET VALUE                    ADJUSTED MARKET VALUE
                                                       SECURITIES      RATE                                                RATIO

                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                      -                                       -
                                                                                                                           TOTAL                              -
MARGIN TRANSFER FROM BANK                                                                                                                      APPENDIX X(b) 163


  CONTACT NAME:                                                              DATE:


CONTACT NUMBER:                                               PARTICIPANT NAME:




      STERLING COLLATERAL TYPE CODES                                   RECEIVER (S) OF €EEA SECURITIES
       TSY        TREASURY BILLS                      CCBM COUNTRY                    RECEIVING AGENT                       BANK OF ENGLAND       PARTICIPANT
       BGS        BRITISH GOV'T STOCKS                                                                    SWIFT ID             BKENGB2L
       BUL        BULLDOGS                                                                                EUROCLEAR NO.          92696
                  £ SECURITIES SETTLED IN
      £EEA
                  EUROCLEAR/CLEARSTREAM                                                                   CLEARSTREAM NO.        78042
    NON-STERLING COLLATERAL TYPE CODES                                                                    CREST ID
EURO EEA SECS     E EEA
BOE EURO PAPER    BOE
HMG NON £ DEBIT   HMG




STERLING COLLATERAL
                                                      DESTINATION OF                                                        MARGIN
COLLATERAL TYPE           ISIN CODE         NOMINAL                                         PRICE        MARKET VALUE                    ADJUSTED MARKET VALUE
                                                        SECURITIES                                                           RATIO

                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                             TOTAL                              -


NON STERLING COLLATERAL
                                                      DESTINATION OF   EXCHANGE                                             MARGIN
COLLATERAL TYPE           ISIN CODE         NOMINAL                                         PRICE        MARKET VALUE                    ADJUSTED MARKET VALUE
                                                        SECURITIES       RATE                                                RATIO

                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                        -                                       -
                                                                                                                             TOTAL                              -
SUBSTITUTION - SECURITIES TO BE RETURNED                                                                                                                                                                                          APPENDIX XI(a) 164


 PARTICIPANT NAME:                                                                                                                REPO START DATE:
      CONTACT NAME:                                                                                                         REPO MATURITY DATE:
  CONTACT NUMBER:                                                                                                                            REPO RATE:
        TODAY'S DATE:


STERLING COLLATERAL
                                                                                                         DESTINATION OF
 COLLATERAL TYPE                         ISIN CODE                            NOMINAL                                                        PRICE                MARKET VALUE           MARGIN RATIO       ADJUSTED MARKET VALUE
                                                                                                           SECURITIES

                                                                                                                                                                                   -                                              -
                                                                                                                                                                                   -                                              -
                                                                                                                                                                                   -                                              -
                                                                                                                                                                                   -                                              -
                                                                                                                                                                                   -                                              -
                                                                                                                                                                                   -                                              -
                                                                                                                                                                                   -                                              -
                                                                                                                                                                                                   TOTAL                          -


NON STERLING COLLATERAL
                                                                                                         DESTINATION OF
 COLLATERAL TYPE                         ISIN CODE                            NOMINAL                                   EXCHANGE RATE                                 PRICE              MARKET VALUE       MARGIN RATIO      ADJUSTED MARKET VALUE
                                                                                                           SECURITIES

                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                        -                                        -
                                                                                                                                                                                                                    TOTAL                        -

                                                                                                                                                                                  TOTAL OF RETURNED ADJUSTED VALUES (A)                          -


PARTICIPANT DETAILS                                                                                                                 RECEIVER(S) OF €EEA SECURITIES                                          BANK OF ENGLAND DETAILS
CREST ID                                                                                                                             CCBM COUNTRY               RECEIVING AGENT                                    CREST ID
EUROCLEAR NO                                                                                                                                                                                                    EUROCLEAR NO.         92696
CLEARSTREAM                                                                                                                                                                                                    CLEARSTREAM NO.        78042
                                                                                                                                                                                                                   SWIFT ID           BKENGB2L



NOTE 1: Total Adjusted Value (A) must be equal to or less than Total Adjusted Value (B), on the form 'Substitution - Replacement Securities To Be Delivered'.
SUBSTITUTION - REPLACEMENT SECURITIES TO BE DELIVERED                                                                                                                                                                      APPENDIX XI(b) 165


 PARTICIPANT NAME:                                                                                                                 REPO START DATE:
      CONTACT NAME:                                                                                                          REPO MATURITY DATE:
  CONTACT NUMBER:                                                                                                                             REPO RATE:
         TODAY'S DATE:


STERLING COLLATERAL
                                                                                                              SOURCE OF
 COLLATERAL TYPE                          ISIN CODE                            NOMINAL                                                        PRICE          MARKET VALUE         MARGIN RATIO       ADJUSTED MARKET VALUE
                                                                                                              SECURITIES

                                                                                                                                                                              -                                            -
                                                                                                                                                                              -                                            -
                                                                                                                                                                              -                                            -
                                                                                                                                                                              -                                            -
                                                                                                                                                                              -                                            -
                                                                                                                                                                              -                                            -
                                                                                                                                                                              -                                            -
                                                                                                                                                                                           TOTAL                           -


NON STERLING COLLATERAL
                                                                                                              SOURCE OF
 COLLATERAL TYPE                          ISIN CODE                            NOMINAL                                               EXCHANGE RATE               PRICE            MARKET VALUE       MARGIN RATIO      ADJUSTED MARKET VALUE
                                                                                                              SECURITIES

                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                 -                                        -
                                                                                                                                                                                                             TOTAL                        -

                                                                                                                                                                         TOTAL OF DELIVERED ADJUSTED VALUES (B)                           -


PARTICIPANT DETAILS                                                                                                                  DELIVERER(S) OF €EEA SECURITIES                                 BANK OF ENGLAND DETAILS
CREST ID                                                                                                                              CCBM COUNTRY         DELIVERING AGENT                                 CREST ID
EUROCLEAR NO                                                                                                                                                                                             EUROCLEAR NO.         92696
CLEARSTREAM                                                                                                                                                                                             CLEARSTREAM NO.        78042
                                                                                                                                                                                                            SWIFT ID           BKENGB2L



NOTE 1: Total Adjusted Value (B) must be equal to or greater than Total Adjusted Value (A), on the form 'Substitution - Securities To Be Returned'.
CREST STERLING COLLATERAL MATURITY                                                                                                                                                                                     APPENDIX XII(a) 166


        PARTICIPANT NAME:                                                                                                         REPO START DATE:                                       BANK OF ENGLAND CREST ID:
              CONTACT NAME:                                                                                                REPO MATURITY DATE:                                                 PARTICIPANT CREST ID:
          CONTACT NUMBER:




   TRANS'N
                          PURCHASE PRICE                       RATE                REPURCHASE PRICE                                                                          TRANSACTION TYPE CODES
    TYPE

                                                                                                             -                                                         MM                  MEMBER TO MEMBER

                                                                                                             -                                                         RPO                 REPO FUNCTIONALITY
                                                                                                                                                                              COLLATERAL TYPE CODES
                                                                                                             -
                                                                                                             -                                                         TSY                     TREASURY BILLS

                                        TOTAL REPURCHASE PRICE                                               -                                                         BGS                 BRITISH GOV'T STOCKS

                                                                                                                                                                       BUL                       BULLDOGS


   TRANS'N          COLLATERAL                                                                                     DESTINATION OF                                                     MARGIN
                                                    ISIN CODE                             NOMINAL                                               PRICE              MARKET VALUE                ADJUSTED MARKET VALUE   CREST CONSIDERATION
    TYPE               TYPE                                                                                          SECURITIES                                                        RATIO

                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                  -                               -
                                                                                                                                                                                       TOTAL                      -                    -


REPURCHASE PRICE PAYMENT NETTING INFORMATION: MATURITY CASH NETTED AGAINST NEW REPO BUSINESS:                                                                                                                          NEW REPO
                                                                                                      CASH TO BE REPAID TO BANK OF ENGLAND:                                                                            PARTICIPANT
                                                                                                    INTEREST TO BE PAID TO BANK OF ENGLAND:                                                                            PRE POS
                                                                                                                                                                                                                       MARGIN
NOTE 1: Adjusted Market Value of collateral should be equal to or greater than the Repurchase Price.
NOTE 2: CREST Consideration should be equal to or less than each line of security's Adjusted Market Value.
NOTE 3: Total CREST Consideration should equal Repurchase Price.
NOTE 4: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.
CREST DBV STERLING COLLATERAL MATURITY                                                                                                                                                                                                      APPENDIX XII(b) 167


   PARTICIPANT NAME:                                                                                                                   REPO START DATE:                                                            BANK OF ENGLAND               PARTICIPANT
         CONTACT NAME:                                                                                                           REPO MATURITY DATE:                                                     SWIFT ID               BKENGB2L
     CONTACT NUMBER:                                                                                                                                                                                     EUROCLEAR NO.          92696
                                                                                                                        BANK OF ENGLAND CREST ID:                                                        CLEARSTREAM NO.        78042
                                                                                                                                PARTICIPANT CREST ID:




  COLLATERAL TYPE                             PURCHASE PRICE                                  RATE                         REPURCHASE PRICE                                                                              COLLATERAL TYPE CODES

                                                                                                                                                              -                                          DBV UBG                UNSTRIPPED BRITISH GOV'T STOCKS

                                                                                                                                                              -                                          DBV BGS                ALL BRITISH GOV'T STOCKS

                                                                                                                                                              -                                          DBV TSY                TREASURY BILLS

                                                                       TOTAL REPURCHASE PRICE                                                                 -                                          DBV ELG                ALL OMO ELIGIBLE SECURITIES



  COLLATERAL TYPE                              MARKET VALUE                            MARGIN RATIO                   ADJUSTED MARKET VALUE                                                                    RECEIVER (S) OF €EEA SECURITIES
                                                                                                                                                              -                                         CCBM COUNTRY                    DELIVERING AGENT

                                                                                                                                                              -
                                                                                                                                                              -
                                                                                                                                                              -
                                                                                                      TOTAL                                                   -


DBV INTEREST COLLATERAL DETAILS
                                                                                     DESTINATION OF                EXCHANGE
         ISIN CODE                                  NOMINAL                                                                                     PRICE                           MARKET VALUE                  MARGIN                ADJUSTED MARKET VALUE
                                                                                       SECURITIES                    RATE
                                                                                                                                                                                                    -                                                             -
                                                                                                                                                                                                    -                                                             -
                                                                                                                                                                                                    -                                                             -
                                                                                                                                                                                                    -                                                             -
                                                                                                                                                                                                    -                                                             -
                                                                                                                                                                                                    -                                                             -
                                                                                                                                                                                                                        TOTAL                                     -


                                                                           Accrued Premium to be paid: £                                                      -                               TOTAL ADJUSTED MARKET VALUE                                         -


NOTE 1 : Total Adjusted Market Value of collateral should be equal to the Total Repurchase Price.                                                                                                                                           PARTICIPANT
NOTE 2 : If GBP denominated collateral is being used for DBV Interest Collateral please enter Exchange Rate as 1.0.                                                                                                                         MATURITY
NOTE 3 : DBV Interest Collateral will only be returned as part of the maturing repo if detailed on this confirmation (and once the Acrrued Interest Premium has been received by the Bank).                                                 PRE POS
EEA STERLING COLLATERAL MATURITY                                                                                                                                                                               APPENDIX XII(c) 168


                                                                                                                                                                                                  BANK OF ENGLAND PARTICIPANT

PARTICIPANT NAME:                                                                           REPO START DATE:                                                             EUROCLEAR NO.                 92696

CONTACT NAME:                                                                         REPO MATURITY DATE:                                                                CLEARSTREAM NO.               78042
CONTACT NUMBER:




     COLLATERAL TYPE                            PURCHASE PRICE                                    RATE                             REPURCHASE PRICE

               £ EEA                                                                                                                                                 -




                                                                                          DESTINATION OF                                                                                 MARGIN
            ISIN CODE                                 NOMINAL                                                                        PRICE                         MARKET VALUE                      ADJUSTED MARKET VALUE
                                                                                            SECURITIES                                                                                    RATIO

                                                                                                                                                                                  -                                            -
                                                                                                                                                                                  -                                            -

                                                                                                                                                                                  -                                            -

                                                                                                                                                                                  -                                            -
                                                                                                                                                                                  -                                            -

                                                                                                                                                                                  -                                            -
                                                                                                                                                                                  -                                            -

                                                                                                                                                                                  -                                            -

                                                                                                                                                                                  -                                            -
                                                                                                                                                                                  -                                            -
                                                                                                                                                                             TOTAL                                             -


REPURCHASE PRICE PAYMENT INFORMATION:                                           MATURITY CASH NETTED AGAINST NEW REPO BUSINESS:                                                                                     NEW REPO
                                                                                                 CASH TO BE REPAID TO BANK OF ENGLAND:                                                                              PARTICIPANT
                                                                                               INTEREST TO BE PAID TO BANK OF ENGLAND:                                                                              PRE POS
                                                                                                                                                                                                                    MARGIN
NOTE 1: EEA - Sterling Denominated securities issued by EEA Governments and Major International institutions (settled in Euroclear/Clearstream)                                                                     IDL
NOTE 2: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.
NON STERLING COLLATERAL MATURITY                                                                                                                                                                               APPENDIX XII(d) 169


                                                                                                                                                                                        BANK OF ENGLAND           PARTICIPANT

 PARTICIPANT NAME:                                                                               REPO START DATE:                                                   SWIFT ID            BKENGB2L

       CONTACT NAME:                                                                       REPO MATURITY DATE:                                                      EUROCLEAR NO.       92696

  CONTACT NUMBER:                                                                                                                                                   CLEARSTREAM NO.     78042




                                                                                                                                                                                        RECEIVER (S) OF €EEA SECURITIES
 COLLATERAL TYPE                          PURCHASE PRICE                               RATE                        REPURCHASE PRICE                                                     CCBM COUNTRY         RECEIVING AGENT

EURO EEA SECS                                                                                                                                        -
BOE EURO PAPER                                                                                                                                       -
HMG NON £ DEBIT                                                                                                                                      -
                                                               TOTAL REPURCHASE PRICE                                                                -


                                                                              DESTINATION OF               EXCHANGE                                                                                            ADJUSTED MARKET
        ISIN CODE                              NOMINAL                                                                                  PRICE                      MARKET VALUE                 MARGIN
                                                                                SECURITIES                   RATE                                                                                                   VALUE

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -

                                                                                                                                                                                    -                                           -
                                                                                                                                                                                                     TOTAL                      -


REPURCHASE PRICE PAYMENT INFORMATION:                                                          MATURITY CASH NETTED AGAINST NEW REPO BUSINESS:                                                               NEW REPO
                                                                                                                CASH TO BE REPAID TO BANK OF ENGLAND:                                                        PARTICIPANT
                                                                                                              INTEREST TO BE PAID TO BANK OF ENGLAND:                                                        PRE POS
                                                                                                                                                                                                             MARGIN
NOTE 1: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.                                             IDL
US TREASURY SECURITIES                                                                                                                                                                                          APPENDIX XIII(a) 170
                                                                                                                           CHAPS

                                                                                                                           RESERVE ACCOUNT (RTGS)                                       BANK OF ENGLAND           PARTICIPANT

   PARTICIPANT NAME:                                                                          REPO START DATE:                                                      SWIFT ID           BKENGB2L
                                                                                                                                                                                       FEDERAL RESERVE
         CONTACT NAME:                                                                 REPO MATURITY DATE:                                                          AGENT'S NAME       BANK OF NEW YORK

     CONTACT NUMBER:                                                                       *PAYMENT METHOD:                                                         AGENT'S SWIFT ID   FRNYUS33
                                                                            * PLEASE STATE WHETHER FUNDS ARE TO BE PAID TO YOUR CHAPS ACCOUNT                                          ENGLAND SCB/6000 ABA
                                                                                                            OR TO YOUR RTGS RESERVE ACCOUNT.                        ACCOUNT            021088904




We refer to the Bank's telephone confirmation that, as a result of the acceptance of bids under the money market operations specified above, we are to enter today into repo transactions with the Bank for the maturity and the
aggregate purchase prices for the maturity specified below. We hereby notify the Bank that the securities to be sold under those repo transactions, and the purchase prices for those securities, are to be as specified below. This notice
is given under the Bank's Operating Procedures relating to its Operations in the sterling money markets and the repo transactions to which it relates are subject to the Terms and Conditions between us and the Bank and to those
Operating Procedures.


  COLLATERAL TYPE                         PURCHASE PRICE                            RATE                          REPURCHASE PRICE

US$ SECURITIES                                                                                                                                       -


                                                                               SOURCE OF                EXCHANGE                                                                                                ADJUSTED MARKET
         ISIN CODE                             NOMINAL                                                                                PRICE                        MARKET VALUE              MARGIN
                                                                               SECURITIES                 RATE                                                                                                       VALUE

                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                   -                                                   -
                                                                                                                                                                                                     TOTAL                             -


PAYMENT NETTING INFORMATION:                                        CASH TO BE REPAID TO BANK OF ENGLAND FROM MATURING REPO:                                                                                  PARTICIPANT
                                                                                              CASH TO BE DELIVERED BY BANK OF ENGLAND:                                                                        MATURITY
                                                                                                                                                                                                              PRE POS
NOTE 1: Adjusted Market Value of collateral should be equal to or greater than the Repurchase Price                                                                                                           MARGIN
NOTE 2: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.                                              IDL
US TREASURY SECURITIES MATURITY                                                                                                                                                                                 APPENDIX XIII(b) 171


                                                                                                                                                                                       BANK OF ENGLAND             PARTICIPANT

 PARTICIPANT NAME:                                                                               REPO START DATE:                                                   SWIFT ID           BKENGB2L
                                                                                                                                                                                       FEDERAL RESERVE
       CONTACT NAME:                                                                       REPO MATURITY DATE:                                                      AGENT'S NAME       BANK OF NEW YORK

  CONTACT NUMBER:                                                                                                                                                   AGENT'S SWIFT ID   FRNYUS33
                                                                                                                                                                                       ENGLAND SCB/6000 ABA
                                                                                                                                                                    ACCOUNT            021088904




 COLLATERAL TYPE                          PURCHASE PRICE                               RATE                        REPURCHASE PRICE

US$ SECURITIES                                                                                                                                       -


                                                                              DESTINATION OF               EXCHANGE                                                                                             ADJUSTED MARKET
        ISIN CODE                              NOMINAL                                                                                  PRICE                      MARKET VALUE              MARGIN
                                                                                SECURITIES                   RATE                                                                                                    VALUE

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -

                                                                                                                                                                                   -                                             -
                                                                                                                                                                                                     TOTAL                       -


REPURCHASE PRICE PAYMENT INFORMATION:                                                          MATURITY CASH NETTED AGAINST NEW REPO BUSINESS:                                                                NEW REPO
                                                                                                                CASH TO BE REPAID TO BANK OF ENGLAND:                                                         PARTICIPANT
                                                                                                              INTEREST TO BE PAID TO BANK OF ENGLAND:                                                         PRE POS
                                                                                                                                                                                                              MARGIN
NOTE 1: For further information regarding the calculation and/or use of Netted Payments please see the first Tab of this spreadsheet titled 'Information Sheet'.                                              IDL
                                                                    3 August 2007   172

Appendix XIV – Parameters set in the Btender system


                   Short-term   Long-term   Sterling bond Swapped
                   repo         repo        purchase      foreign bond
                                                          purchase
Minimum          £5mn           £5mn        £5mn         5mn currency
bid/offer amount                                         units
Minimum            £1mn         £1mn        £1mn         1mn currency
bid/offer                                                units
increment
Maximum           40%           40%         100%         100%
percentage     of
OMO         which
Participant can
bid/offer for
Allocation         £0.1mn       £0.1mn      £0.1mn       0.05mn
increment                                                currency units
Number         of -             3           3            3
decimal places
in    rate/price/
yield
Plausibility       -            +/-50bps    +/-200p      +/-50bps
margin         for
rate/price/yield
Maximum           -             10          99           10
number         of
bids/offers per
maturity/security
Maximum           1             40          999          40
number         of
bids/offers
across operation
                                                          3 August 2007   173

Appendix XV - Screen Prints from Btender
i) Short Term Repo Pre-Operation announcement

17/07/07: Announcement on Short-term Repo Tender

Official Bank Rate        5.75%

Auction type              Fixed rate tender

Allotment method          Non discriminatory rate basis

Date of operation         16/07/07

Time for submission of bids 10:30AM - 11:00AM

Settlement date           16/07/07

Maturity date             23/07/07

Minimum bid amount                              Stg 5mn

Multiples of                                    Stg 1mn



Total size of operation                  Stg 30,000mn



Short term repo bidding screen
                                                                               3 August 2007   174

Short term repo results screen




ii) LTR Pre-Operation Publication - 01/03/2007: Announcement on Long-term Repo Tender


Date of Operation                                 08/03/2007

Time for submission of offers                     10:00AM - 10:30AM

Settlement Date                                   09/03/2007

Auction Type                                      Variable Rate Tender

Allotment Method                                  Discriminatory Price Basis

Minimum Offer Amount                              Stg 5mn

Multiples of                                      Stg 1mn



Total size of operation (Stg mn)                  1000

3 mth (91 days) maturing on 08/06/07 (stg mn)     500

6 mth (182 days) maturing on 07/09/07 (stg mn)    200

9 mth (273 days) maturing on 07/12/07 (stg mn)    200

12 mth (364 days) maturing on 07/03/08 (stg mn)   100
                     3 August 2007   175

LTR Bidding screen
                                                                                                                   3 August 2007   176

Results screen for LTR




iii) Gilt tender Pre-Operation Announcement


Date of Operation                                                                        09/03/2007

Time for submission of offers                               10:05AM - 10:25AM

Auction Type                                                Variable Price Tender

Allotment Method                                            Discriminatory Price Basis

Minimum Offer Amount                                        Stg 5mn

Multiples of                                                Stg 1mn



Total size of operation (Stg mn)                            500

All bond purchases will be based on relative value within the maturity sector

Maturity Range 01/01/10 - 31/12/10 : (Stg mn) 160 - 180

Eligible Stocks

UKT4.75/06/10                                               min of Stg 80mn and a max of Stg 90mn     Settlement Date 12/03/07
                                                                                                               3 August 2007   177


UKT 6.25 25NOV10                                          min of Stg 80mn and a max of Stg 90mn   Settlement Date 12/03/07

Maturity Range 01/01/11 - 31/12/16 : (Stg mn) 320 - 360

Eligible Stocks

UKT 9 12JUL11                                             min of Stg 80mn and a max of Stg 90mn   Settlement Date 12/03/07

UKT 5.0 07Mar12                                           min of Stg 80mn and a max of Stg 90mn   Settlement Date 12/03/07

UKT4.75ep15                                               min of Stg 80mn and a max of Stg 90mn   Settlement Date 12/03/07

UKT_4_070916                                              min of Stg 80mn and a max of Stg 90mn   Settlement Date 12/03/07



Gilt tender offering screen
                                                                                                  3 August 2007      178

Gilt tender results




iv) Swapped Foreign Bond Tenders Pre-Operation announcement


09/03/07: Announcement on Swapped Foreign Currency Bond Tender

Date of Operation                                             09/03/2007

Time for submission of offers                                 01:10PM - 01:20PM

Auction Type                                                  Variable Rate Tender

Allotment Method                                              Discriminatory Rate Basis

Minimum Offer Amount                                          Stg 5mn

Multiples of                                                  Stg 1mn



Total size of operation (Stg mn)                              500

All bond purchases will be based on relative value within the maturity sector

Maturity Range 01/01/10 - 31/12/10 : (Stg mn) 100

Eligible Stocks

T 12.75 15/11/10                                              Amount Stg 100mn            Settlement Date 12/03/07
                                                                                                         3 August 2007      179


Maturity Range 01/01/11 - 31/12/16 : (Stg mn) 400

Eligible Stocks

T 12.000 15/08/13                                       min of Stg 75mn and a max of Stg 125mn   Settlement Date 12/03/07

T415/02/14                                              min of Stg 75mn and a max of Stg 125mn   Settlement Date 12/03/07

T 11.25 15/2/15                                         min of Stg 75mn and a max of Stg 125mn   Settlement Date 12/03/07

T 7.25 15/5/16                                          min of Stg 75mn and a max of Stg 125mn   Settlement Date 12/03/07

Maturity Range 31/12/99 - 01/01/01 : (Stg mn) 0 - 500



Exchange Rates
Exchange Rates will appear here once auction has

started




Swapped bond results screen

				
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