Bank of England Axes Coal Bonds from Loan Collateral

The Bank of England has announced that it will no longer accept coal bonds as collateral for major loan facilities, effective in October. This move aims to protect its balance sheet from potential financial risks associated with thermal coal firms.

According to the updated policy framework, assets linked to thermal coal are excluded from borrowing collateral arrangements. Commercial institutions like Barclays, Lloyds, NatWest, and HSBC will no longer be able to use these bonds as financial guarantees when securing operational loans from the central bank.

The Bank of England highlighted that thermal coal firms face heightened financial exposures as the global economy transitions toward net-zero emissions. To mitigate this risk, the central bank is also applying value discounts to bonds across other related sectors, such as oil and gas.