UK Banks Ramp Up Riskier Collateral Use at Bank of England

The Bank of England’s Indexed Long-Term Repo facility supplies banks with six-month funding against a broad range of collateral, including securitised loans and loan portfolios. Its importance has grown as the central bank unwinds quantitative easing and drains reserves from the financial system. Increased pledging of Level C assets, including debt linked to high-interest store cards and vehicle leases, raises questions about the BoE’s exposure to potentially illiquid credit while the European Central Bank is tightening its collateral rules.

A Reuters review published on Sept. 2, 2026, found that banks pledged £1.9 billion ($2.56 billion) of Level C collateral at the Aug. 18 ILTR auction, triple the previous week’s amount and the most since March 2020. The BoE now holds about £17.8 billion ($24 billion) of such collateral through the facility, up from £8.7 billion a year earlier and less than £1 billion in mid-2024. The central bank said robust risk management, including larger haircuts on riskier assets, limits its exposure.