British Banks Pledging Higher-Risk Assets as Collateral at Bank of England

British banks are increasingly using higher-risk assets, such as loans tied to high-interest store cards and vehicle leases, as collateral at the Bank of England (BoE). This trend is an intended consequence of the BoE's 2022 decision to reverse its quantitative easing program, which aimed to reduce cash in the financial system. A Reuters review of BoE filings indicates that the central bank holds approximately £17.8 billion in 'Level C' collateral, more than double the amount from a year ago. Unlike the European Central Bank, the BoE accepts a broader range of assets, including certain securitized mortgage-backed debts, which were a significant factor in the 2008 financial crisis. The BoE states its Indexed Long-Term Repo (ILTR) facility is designed to allow a wide array of assets while maintaining robust risk management.