Andrew Hauser, the BoE's executive director for markets, said there was no mechanical link between the volume of British government bonds it will sell and falls in the size of its balance sheet and the central bank reserves available to banks.

Moreover, financial markets do not expect the BoE to start to sell any of the 435 billion pounds of gilts which it purchased under its quantitative easing programmes any time soon.

Nonetheless, Hauser said that the BoE expected the financial system's appetite for central bank reserves to fall materially after QE is reversed.

"Bringing all this together, our conversations with firms suggest the current sterling 'preferred minimum range of reserves' is of the order of 150-250 billion pounds," Hauser said in a speech to a financial market audience in London.

Adding in other items such as banknotes and other non-reserves liabilities, this would reduce the total balance sheet to 275-375 billion pounds, or roughly 12%-18% of gross domestic product, Hauser added.