BoE proposals re new collateral rules pushing investors to migrate from LIBOR

The BoE is seeking comments on how to protect its balance sheet from the risks associated with the phase-out of LIBOR. The central bank plans to restrict the use of LIBOR-linked collateral and has put forward three possible approaches, one of which some market participants view as an effective ban on legacy LIBOR-linked collateral.

The Bank of England (BoE) is planning to restrict the use of Libor-linked collateral in its sterling liquidity pools as a way to prod investors away from the fading rate. What is undecided is how trenchant the measure it finally takes will be.

The central bank is seeking comment on three possible approaches to protecting its balance sheet from Libor’s all-but-certain demise after the end of 2021. The toughest of the three, which some view as an effective ban on legacy Libor collateral, would