Thursday, October 15, 2015

B of E Explores Accepting Equities as Collateral

In a speech in July before at the Money Markets Liaison Committee in London, Chris Salmon, Executive Director, Markets, Bank of England hinted that the Bank of England was exploring means by which it could accept equities as collateral for its market operations, should the need arise.  Although short on details, Mr. Salmon said that removing roadblcoks to accepting equities as collateral would bolster the bank's flexibility in times of stress as well as in normal market conditions. 

"At present, the Bank accepts a very broad range of collateral, including government bonds, asset backed securities and pools of ‘raw’ loans. But the Bank can further bolster its flexibility by removing any technical obstacles to accepting equities as collateral, should the need arise."

While short on details, Mr. Salmon did indicate that the regulatory and other work necessary to facilitate the Bank's acceptance of equities as collateral would take place through the balance of 2015 and well into 2016.