Bank of England revises SMF collateral eligibility and haircuts, with phased dates from 19 June 2026
SMF participants must reassess pledged collateral and drawing capacity against revised eligibility, credit-rating thresholds and haircut schedules taking effect 19 June and 31 October 2026
Change
By Market Notice dated 11 June 2026, the Bank of England revised Sterling Monetary Framework collateral eligibility and haircuts — extending eligibility to certain government-linked debt and lowering agency-bond rating thresholds from 19 June 2026, and reclassifying corporate bonds, excluding thermal-coal-linked issuers and revising corporate haircuts from 31 October 2026.
Why it matters
The changes are partly expansionary and partly restrictive. From 19 June 2026, eligibility widens to AA--quality G10 and Australian sub-sovereign and policy-bank debt as Level B, while the minimum rating for G10 government-guaranteed agency bonds and US GSE securities (Freddie Mac, Fannie Mae, FHLB) falls from AAA-equivalent to AA--equivalent; new index-linked haircut schedules apply to gilts and other Level A/B sovereign collateral. From 31 October 2026, all eligible corporate bonds become Level B only, thermal-coal-revenue issuers lose eligibility, and corporate-bond haircuts are recalculated on a lower base with net-zero-transition add-ons for exposed sectors. A new interactive ABS and Covered Bond eligibility-request form replaces the ABS-CERT template at end-June 2026.
Implications
- — Bank treasury and collateral-management teams with SMF access must re-map their eligible collateral pools to the revised classifications and rating thresholds — corporate bonds move to Level B only, AA--quality government-linked and US GSE securities change tier/eligibility, and thermal-coal-linked corporate bonds must be removed before 31 October 2026 — and recalculate drawing capacity accordingly.
- — Collateral and liquidity-risk teams must apply the new index-linked sovereign haircut schedules from 19 June 2026 and the revised corporate-bond haircuts and net-zero add-ons from 31 October 2026 when valuing pledged collateral, since these change the secured value and available drawing capacity.
- — Teams requesting eligibility for Asset-Backed Securities or Covered Bonds must use the new interactive online request form from end-June 2026, which replaces the ABS-CERT template, while meeting the unchanged transparency requirements.
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