Eligible collateral

A list of the eligible collateral for liquidity insurance schemes and the legal documentation you’ll need

Eligible collateral for liquidity insurance schemes

We lend through our market operations against collateral delivered by firms. This collateral has to be good enough so we can sell or keep it, if a counterparty fails to repay us.

For information on how to deliver securities in our market operations, please see our Collateral settlement and management page.

Collateral needed for each operation or facility

Collateral Level A Level B Level C
Operational Standing Facilities Y N N
Short-Term Repo OMOs Y N N
Indexed Long-Term Repo OMOs Y Y Y
Discount Window Facility Y Y Y
Contingent Term Repo Facility Y Y Y
TFSME Lending Facility Y Y Y
Funding for Lending Scheme Y Y Y
Term Funding Scheme Y Y Y

Equities as Collateral

The Bank does not normally accept equities as collateral under the SMF but has put in place the technical measures to allow it to do so at its discretion, should the need arise. In order to deliver equities in the event that the Bank takes the decision to include them as eligible collateral in an operation, counterparties would need to have made arrangements with the Bank in advance and have opened a tri-party equity account with an eligible provider. The Bank’s eligible providers are currently BNY Mellon and Euroclear Bank SA/NV. Participants wanting more information, or to set up a tri-party account, should contact the Bank on applications@bankofengland.co.uk.

Collateral referencing LIBOR

The Bank’s policy with regards to collateral referencing LIBOR for use in the Sterling Monetary Framework is detailed in this Market Notice, published on 26 February 2020.

The policy objective is to encourage forward planning by both the Bank and SMF members to ensure that borrowing capacity is maintained and that public money is appropriately protected against the risks of a disorderly LIBOR transition. The policy adopts a haircut glide path for all LIBOR linked collateral maturing after end-2021, that will be phased in from 1 October 2020 and result in haircuts being 100% by end 2021, at which point all LIBOR linked collateral will cease to be eligible for use in the SMF. Further, from 1 October 2020, newly issued LIBOR linked collateral will be ineligible for use in the SMF. The Bank considers that this approach should act as an additional incentive both to cease new LIBOR issuance in cash markets and to amend legacy LIBOR linked collateral.

The FPC has made clear that continued reliance of global financial markets on LIBOR poses a risk to financial stability that can only be reduced only through a transition to alternative risk-free rates by end-2021. These risks can only be fully mitigated by removing any links to LIBOR ahead of that date, but the Bank also views broad adoption of robust fallback language as an important risk mitigant. Finalisation and adoption of market standards for robust fallbacks remains in progress, including through the exercise undertaken by ISDA with respect to derivative markets. The Bank will monitor these market developments and will keep under review the potential to distinguish between LIBOR Linked Collateral with robust fallback language and that without, as market practice develops.

In June 2019, the Bank of England published a discussion paper that sought feedback on the Bank’s Framework. The paper outlined a number of risk management approaches under consideration by the Bank to ensure that it remains well placed to provide liquidity insurance in support of financial stability. 

The Bank received 20 responses to the Discussion Paper. Responses were received from banks and building societies, of a range of size and business model, all of which are members of the SMF, although the discussion was open to the entire market. Key themes from these responses are discussed below: 

Documentation and data templates for eligible collateral

(Securitisations and Raw Loans)

This page was last updated 01 April 2020
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