The Bank of England on 11 June 2026 published a market notice that updated the collateral eligibility framework for the Sterling Monetary Framework, signalling adjustments to the rules that determine which assets banks may post as collateral in central bank operations.
WHAT THE NOTICE COVERED
The market notice set out changes to the Bank's collateral eligibility framework for the Sterling Monetary Framework, covering the criteria and operational arrangements that govern the acceptance of assets in BoE operations. The document revised the framework that institutions use when assessing whether a security qualifies as eligible collateral with the Bank, and it outlined the procedural steps that counterparties must follow to comply with the updated rules.
The Bank's Market Notice functioned as the formal vehicle to communicate the amendments to market participants, including banks and other eligible counterparties that access the SMF for liquidity operations. The publication date and issuance made the revised framework effective for counterparties to review and implement requirements in their collateral management and repo trading practices.
MARKET AND OPERATIONAL IMPLICATIONS
Changes to collateral eligibility can affect a range of market dynamics, including collateral management strategies, secured funding costs and the composition of assets used in repo markets. By updating the eligibility framework, the Bank of England altered the set of securities that counterparties consider for central bank operations and internal liquidity buffers. Firms that operate market operations desk and collateral teams had to reassess their eligible pools, reconcile internal policies with the Bank's updated criteria and adapt operational processes to ensure ongoing access to SMF operations.
For treasury operations at banks, the notice required a review of collateral mobilisation plans and custody arrangements. The SMF underpins key standing facilities and market operations that provide sterling liquidity to the banking system. Adjustments to eligibility rules therefore influence which securities repositories and custodians prioritise for mobilisation, and they inform trading and portfolio allocation decisions among dealers and other market participants who transact in secured markets.
Regulatory reporting and internal risk frameworks also intersect with collateral eligibility. Firms typically incorporate central bank eligibility into their collateral optimisation engines, and changes prompted updates to these systems. Risk teams needed to evaluate how the revised eligibility criteria affected counterparty exposures, concentration metrics and the valuation processes applied to collateral pledged to the Bank.
The Bank of England published the notice to ensure transparency around the operational application of the SMF. Market notices play a core role in communicating policy and operational changes to the financial sector, enabling participants to factor the adjustments into short term funding plans and longer term liquidity management strategies. The Bank's framework governs secured operations that support market functioning and the transmission of monetary policy, so clarity in eligibility rules is material for the day to day plumbing of sterling money markets.
While the market notice contained the formal amendments, counterparties and market observers were expected to consult the full text for the precise scope and transitional arrangements. Firms that rely on the SMF had an immediate operational task, to align collateral documentation, settlement processes and intraday liquidity arrangements with the Bank's updated criteria.
Market infrastructure providers and custodians also faced practical implications, since changes in eligibility can shift settlement patterns and demand for particular safekeeping services. The Bank's communication of the update via a market notice provided a clear timeline and the official reference for compliance and implementation work across the market.
Sources: Bank of England