The Bank expanded significantly the scale of lending and range of collateral acceptable in its sterling market operations in the face of the financial crisis. But central banks, like any other business, need to protect their balance sheet. To that end, Paul Fisher identifies three principles that central banks should look to observe, reflecting: the prospective solvency of creditors; the quality of collateral; and the achievement of public policy objectives. Those principles in turn require decisions about collateral eligibility, valuation, haircuts and exposure limits. He says: "These are important questions for the banking system as a whole, and have presented new and complex risk management challenges for central banks over the past few years."
Published on
14 April 2011
Press release