British Banks Rush to Swap High-Risk Assets for Central Bank Cash
British banks are increasingly pledging higher-risk assets as collateral at the Bank of England's weekly auction for six-month funds, according to a Reuters review of BoE filings.
In August, banks pledged £1.9 billion worth of the BoE's highest-risk type of collateral, known as Level C, which is more than three times the amount pledged in the previous week and the most since March 2020.
The total value of Level C collateral on the BoE's books has risen to about £17.8 billion from £8.7 billion a year ago and under £1 billion in mid-2024.
The BoE accepts a range of products, including debt issued by Harben Finance, which is controlled by Barclays and owns payments on buy-to-let mortgages originated by former UK lender Bradford & Bingley before its 2008 government rescue. Some tranches of the debt have been downgraded twice by Fitch Ratings and once by S&P Global in the past year.