The Bank of England published a market notice on 11 June 2026 that revised the collateral eligibility framework for the Sterling Monetary Framework, outlining a set of changes to eligibility criteria and related operational arrangements.
CHANGES AND SCOPE
The Market Notice updated the rules that determine which assets counterparties may use as collateral in operations conducted under the Sterling Monetary Framework. The Bank set out amendments to its eligibility framework, addressing the types of instruments that qualify, the conditions under which they are accepted, and the administrative procedures that apply to collateral management. The notice formed part of the Bank's routine maintenance of the SMF infrastructure and governance.
The revisions applied to all counterparties that participate in the SMF, including firms eligible to access standing and active operations with the Bank. The Bank of England described the changes in a public notice, enabling market participants to assess the implications for their collateral pools and liquidity management processes. The notice also referenced operational arrangements that govern how eligible collateral is identified and processed in central bank operations.
MARKET IMPLICATIONS AND CONTEXT
The Bank's update came against a backdrop of ongoing efforts by central banks globally to ensure that collateral frameworks remain fit for purpose as financial markets evolve. Collateral eligibility rules influence the composition of banks' liquidity buffers and the functioning of secured funding markets. Changes to eligibility therefore affect demand for particular securities, the composition of assets held by banks for reserve management, and the operational workflows that support repo and other secured transactions.
Market participants typically needed to review the updated eligibility lists and operational guidance to determine whether assets currently pledged to the Bank remained acceptable. The Bank's notice gave counterparties the information required to align their collateral inventories with the new framework. For some firms, the update prompted internal assessments of asset allocation, collateral optimisation strategies, and settlement procedures, to ensure continued access to SMF facilities under the revised rules.
From a policy perspective, the Bank of England used the SMF collateral framework to support monetary policy implementation and to provide sterling liquidity when required. The eligibility framework balanced the Bank's risk management objectives with the need to maintain broad and effective access to central bank operations for qualifying counterparties. The public notice functioned as a transparency mechanism, communicating to markets how the Bank managed the acceptability of assets that underpin its operations.
Operationally, changes to eligibility criteria have implications for market infrastructure, including systems that value collateral, apply eligibility filters, and manage substitution or margining processes. Firms active in the secured funding markets and treasury operations teams within banks and building societies paid close attention to operational detail in the Bank's notice to avoid settlement disruptions and to preserve access to central bank facilities under the SMF.
While the Market Notice set out the framework changes, the Bank of England retained its role as central counterparty and as the manager of the sterling liquidity provision framework. The notice aimed to provide clarity and predictability for market participants, while ensuring that the Bank's collateral policies continued to reflect prevailing market conditions and risk considerations.
Sources: Bank of England