Discussion Paper

Is There Discount Window Stigma in the United Kingdom?

Abstract: At the onset of the financial crisis in the summer of 2007, news that Barclays had borrowed from the Bank of England (BoE) received wide media coverage. This information triggered concerns that the BoE's lending facility may have become stigmatized, prompting market participants to interpret borrowing from the BoE as a sign of financial weakness. If such stigma discouraged borrowing, of course, it would defeat the purpose of the facility. We review the history of the BoE's lending facilities and experiences with stigma, both historically and in the recent period. We also compare the BoE's and the Fed's lending facilities, and conclude that bilateral lending by central banks may tend to become stigmatized to some extent, no matter how the lending facility is structured.

Keywords: UK discount window stigma;

JEL Classification: E5; G2; N2; F00;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2016-09-12

Number: 20160912