Regulation 6 Backing assets

(1)

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

(2)

The following kinds of assets are specified as backing assets—

(a)

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

(b)

current coins of the United Kingdom; and

(c)

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

(3)

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

(a)

by the Bank of England; or

(b)

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

(4)

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

(5)

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

(6)

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

(a)

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

(b)

in the form of current coins of the United Kingdom.

(7)

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

(a)

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

(b)

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

(8)

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