On 13 February 2025, HM Treasury (HMT) and the Bank of England (BoE) published an updated version of the 2018 Memorandum of Understanding (MoU) on their financial relationship, along with a joint statement.

The updated MoU, which takes effect from the date of publication, maintains the capital and income framework for the BoE. HMT also notes that the MoU continues to reinforce the BoE’s independence and resilience to deliver its statutory policy objectives of monetary and financial stability, and provides transparency concerning the BoE’s finances.

In their joint statement, HMT and the BoE explain that they have concluded a 5-yearly review of the parameters of the BoE’s capital framework as set out in Section 2B of the MoU, and the review concluded that:

• The capital framework has been effective in delivering its intended objectives at inception in 2018.
• The existing parameters of the capital framework remain adequate to support the BoE’s balance sheet.
• The existing BoE-HMT financial arrangements, as set out in the MoU, are sufficient to support the BoE’s planned transition to a demand-driven operating framework fully backed by repo.

The BoE and HMT plan to keep these arrangements under review during the BoE’s balance sheet transition to a new steady state in coming years and to ensure close engagement as per the existing governance and information sharing channels set out in the MoU.