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The Bank of England (“BoE”) has initiated a review of its own exposure to LIBOR, and in particular, the exposure to the collateral that banks and other financial firms are asked to provide when borrowing from the BoE under the Sterling Monetary Framework (“SMF”), where the BoE only lends against collateral of sufficient quality and quantity, in order to protect itself from counterparty credit risk.
The BoE has just published a discussion paper (the “Paper”) on the approach to collateral referencing LIBOR, for use in the SMF.
The Paper advises regulated firms that:
The Paper advises that the BoE is currently considering the following risk management approaches for collateral linked to interbank offered rates:
Comments to the Paper should reach the BoE by 27 September 2019. Participants in the SMF who wish to maintain the strongest possible level of borrowing capacity at the SMF should participate in the feedback process.
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 The SMF, amongst other things, provides liquidity insurance to banks and certain other financial firms during periods of firm-specific or market stress.