Shafaqna English– British commercial banks are demonstrating a growing appetite for pledging riskier categories of assets as collateral to the Bank of England, according to a detailed examination of official filings conducted by Reuters.
These assets include relatively illiquid and higher-yielding credit instruments, such as consumer loans tied to high-interest retail store cards and automotive lease agreements. This trend signals that banks may be facing increased pressure to secure central bank funding, even if it means offering collateral that carries greater credit and market risk than traditional government bonds or highly rated corporate debt.
The latest data from the Bank of England reveals that on August 18, commercial banks pledged a total of £1.9 billion—equivalent to approximately $2.6 billion—of the central bank’s highest-risk collateral category during its weekly auction for six-month maturity funds.
This figure represents the largest volume of such high-risk collateral pledged since March 2020, when markets were in the throes of the early pandemic turmoil. Notably, the amount was three times higher than the total pledged in the previous week, underscoring a dramatic and sudden escalation in banks’ reliance on riskier assets for central bank liquidity.
Source: Reuters