Bank of England Collateral Eligibility: ABS and RMBS at Level B

When a UK issuer prices a new residential mortgage-backed security or a credit-card asset-backed security this autumn, one decision is taken long before the roadshow: whether the senior notes will meet Bank of England collateral eligibility. A security that qualifies as Level B collateral may be used in SMF facilities that accept Level B, subject to the applicable haircut and operating requirements. A security that does not meet Level B may still qualify as Level C collateral if it meets the relevant Level C criteria. That single design choice shapes tranching, the choice of benchmark rate, the listing, and the pool the arranger assembles.

The Bank of England publishes criteria for securities it may accept as Level B collateral, a separate and wider Level C set for less liquid assets, and a request process that runs through a standard form and a monthly eligible-securities list. Several Level B criteria concern structural features of the security, including tranche seniority and the composition of the underlying asset pool, while transparency obligations continue after issuance. On 11 June 2026 the Bank issued a Market Notice with three separate timetables: government-linked Level B eligibility and index-linked sovereign haircut schedules from 19 June 2026; a new ABS and covered-bond request form at the end of June 2026; and corporate-bond eligibility and haircut changes from 31 October 2026. The notice did not announce a 31 October change to ABS or RMBS eligibility criteria or base haircuts. The cited Bank materials do not prescribe a separate issuance-day eligibility test: a security must meet the applicable criteria when the Bank assesses it and remains subject to continuing requirements and the Bank’s discretion.

Related reading: our note on the 2026 changes to Sterling Monetary Framework collateral eligibility.

The collateral calendar that structuring teams are working to

Eligibility is a moving target, and 2026 moved several of the goalposts at once. The dates below are the ones an arranger and an SMF Participant need on the same page before a deal is signed off.

• 18 June 2026: the current Level B Collateral Set document, which sets out the eligible security categories and the conditions that apply to them.
• 11 June 2026: the Market Notice setting out changes to collateral eligibility, the eligibility-request process for ABS and covered bonds, and haircuts, framed as support for the transition to a repo-led, demand-driven system for supplying reserves.
• 18 June 2026: the dated Level C Collateral Securities document, covering the less liquid set that includes own-name securities.
• 19 June 2026: a broadening of Level B to add G10 and Australian regional and local government bonds and qualifying policy banks’ debt.
• End of June 2026: a new interactive eligibility request form on the Bank’s website, replacing the request template previously used for ABS and covered bonds, with no change to the underlying transparency requirements.
• 31 October 2026: the date from which the Market Notice’s corporate-bond eligibility changes and revised corporate-bond haircuts take effect.
• Monthly: the list of eligible securities is refreshed on the Bank’s eligible-collateral page.

For ABS and RMBS, the 11 June 2026 Market Notice did not announce new base haircuts effective on 31 October 2026. That date applies to corporate-bond eligibility and corporate-bond haircut changes; the current securities haircut table is dated 18 June 2026. The Bank frames the June 2026 changes as supporting the transition to a repo-led, demand-driven operating framework for supplying central bank reserves.

Which eligibility features must be addressed in the structure

Several Level B criteria concern structural features of the security. For Level B RMBS and ABS, the current criteria include the most senior tranche, credit quality broadly equivalent to AAA, listing and an eligible homogeneous underlying pool. The benchmark provision is an exclusion: a security is ineligible if it references, reverts to, or may be required to reference a US dollar credit-sensitive rate at coupon, embedded-swap or underlying-loan level. Eligibility is not irrevocably fixed at issuance because ongoing transparency requirements and the Bank’s continuing discretion also apply.

Prepositioning is the practice that makes this worth the effort. An SMF Participant can pre-position eligible collateral so that the Bank can risk-assess, value and haircut it in advance, allowing relevant liquidity facilities to be used more quickly when needed. Same-day settlement depends on the facility and its operating deadlines; for the Discount Window Facility, participants should contact the Bank before noon and deliver sufficient collateral ahead of the request. Where the Participant delivering the security originated the underlying mortgages, the security is an own-name asset for the Level B test. Such securities are not accepted as Level B collateral and may be considered for Level C. The Bank’s stated test is origination of the underlying assets by the delivering Participant, not retention or external distribution by itself.

There is an operational overlap with securities-financing infrastructure, but SMF collateral eligibility and UK SFTR reporting are separate questions. Firms should assess the reporting scope of any related securities financing transaction under the governing UK SFTR provisions rather than infer reportability from the collateral’s use in an SMF facility.

The Level B checklist for ABS and RMBS

Level B is the Bank’s set of high quality securities that would normally trade in liquid markets and that the Bank can value and risk-manage through haircuts. The Bank applies two tests before it will treat a security as Level B: that the debt is liquid enough to be realised if a counterparty defaults, and that its price behaviour and liquidity are predictable enough to set an appropriate haircut. For a new ABS or RMBS aiming at that set, the conditions are specific.

Residential mortgage-backed securities

The Bank accepts the most senior tranches of UK and Dutch prime RMBS of the highest credit quality, broadly equivalent to AAA. The underlying assets must be homogeneous pools of prime first-charge residential mortgages. Unlisted RMBS are not eligible for Level B. That condition rules out an unlisted RMBS. The Level B document does not state a separate exclusion based solely on private or bilateral placement.

Asset-backed securities

Under the current Level B document, the ABS collateral types specified include: the most senior tranches of UK, US and EEA ABS backed by homogeneous pools of credit cards issued to prime borrowers, and the most senior tranches of UK, US and EEA prime ABS backed by homogeneous pools of auto loans. Each must be of the highest credit quality, broadly equivalent to AAA, and unlisted ABS are ineligible. Practitioners should confirm whether student-loan ABS remains eligible as Level B collateral under the current Level B document; the Level C document accepts eligible student-loan ABS.

The conditions that apply across the board

Beyond the asset-class rules, the Level B document attaches conditions that a structuring team has to satisfy at the same time:

• The underlying assets must be cash, not synthetic, meaning that they must not be derivatives.
• A security whose credit quality rests on a third-party guarantee or insurance, a wrap, is not eligible, apart from the government-guaranteed instruments the Bank lists separately.
• Securitisations containing securitisations are not accepted, which excludes re-securitisation structures.
• The note must be denominated in one of the accepted currencies: sterling, euro, US dollars, Australian dollars, Canadian dollars, Swedish krona or Swiss francs, with yen limited to Japanese Government Bonds and bank debt under the UK Government’s Credit Guarantee Scheme. Regulated covered bonds are narrower still, eligible only in sterling or euro.
• The security must be capable of delivery to the Bank through the delivery mechanisms in the Bank’s operating procedures.
• Securitisations and covered bonds must meet the Bank’s transparency requirements.

Regulated covered bonds have separate Level B criteria: UK, French and German regulated covered bonds of the highest credit quality, broadly equivalent to AAA; an original issue size of at least GBP 500 million or EUR 500 million, depending on the currency of issue; and homogeneous pools of UK or EEA social housing loans, public-sector debt or prime residential mortgages. The current Level B document does not state a general listing or most-senior-tranche condition for regulated covered bonds.

The benchmark trap: US dollar credit-sensitive rates

One condition catches structurers off guard because it reaches inside the cash flows. A security that references, reverts to referencing, or may be required to reference a US dollar credit-sensitive rate is not eligible, and the exclusion bites at the coupon, at an embedded swap, or at the underlying loan level. The Bank names the rates it means: AMERIBOR, the Bloomberg Short-Term Bank Yield Index (BSBY), the USD Credit Inclusive Term Rate (CRITR), the USD Credit Inclusive Term Spread (CRITS) and similar rates.

The point that matters for a deal with any US dollar leg is that a fallback clause counts. A note that pays on a risk-free rate today but carries contractual language allowing a switch to a credit-sensitive rate can fail the test on the language alone. Structuring teams that assumed the benchmark question was settled by the end of LIBOR still have to check the fallback waterfall in the documentation, because the Bank is evaluating the full range of rates the note could be required to reference across its contractual life, including anything the fallback provisions could require.

What Level B leaves out: the own-name route into Level C

Own-name securities are the deliberate exception in the Level B rules. Covered bonds and securitisations containing assets originated by the Participant will not be accepted as Level B collateral, but may be considered for Level C. That sentence means an RMBS delivered by the Participant that originated the underlying mortgages is excluded from Level B. It may be considered for Level C and must satisfy the applicable Level C criteria.

Level C is the Bank’s set of typically less liquid assets: securitisations, securities delivered by the same entity that originated the underlying assets, and portfolios of loans such as mortgages. The dated Level C Collateral Securities document accepts the most senior tranches of UK and EEA RMBS, and of UK, US and EEA ABS backed by credit cards, auto loans, consumer loans, student loans, social housing loans and certain equipment leases, at a credit quality broadly equivalent to A3/A- or above. Own-name RMBS and own-name ABS are accepted in that set.

Read the two documents together and the structuring logic falls out. A qualifying listed, AAA-equivalent UK or Dutch prime RMBS, or qualifying credit-card or auto-loan ABS, may be eligible for Level B. A security containing assets originated by the delivering Participant is excluded from Level B and may be considered for Level C if it meets the applicable criteria. Haircuts depend on asset class, maturity and relevant add-ons, including the own-name add-on where applicable. Whether a security is own-name depends on whether the Participant delivering it originated the underlying assets; the Bank’s criteria do not make retention or sale, by itself, the classification test. Level C is also where loan collateral itself sits, so a bank without a securitisation can still preposition a portfolio of whole mortgages, subject to the Bank’s separate loan collateral requirements.

The transparency requirements behind the eligibility stamp

Meeting the asset-class criteria does not complete the eligibility test. For ABS and covered bonds, the Bank’s 11 October 2019 transparency notice also requires anonymised loan-level data using the relevant Bank template; publication of the prospectus and applicable closing transaction documents; standardised investor reports; and, for ABS, a freely available cash-flow model.

Loan-level data must be provided at least quarterly on, or within one month of, an interest payment date and must be no more than one month old when published. Investor reports must be provided at least quarterly, or within one month of, an interest payment date. The information covered by the notice must be made freely available in accordance with its access requirements. The 11 October 2019 notice consolidates and supersedes the Bank’s earlier transparency notices.

The Bank’s transparency notice applies to all ABS and covered-bond transactions, including private placements and unlisted issuance. Level B separately excludes unlisted RMBS and ABS; the cited materials do not state that this exclusion is based on the disclosure obligations of a particular listing venue. Teams weighing where to list a UK deal are looking at the same market-transparency infrastructure that sits behind the UK bond consolidated tape and post-trade transparency.

The eligibility-request process, step by step

The Bank requires a formal eligibility request. The current Level B and Level C documents direct SMF Participants to complete the ABS and Covered Bond Eligibility Request Form available through the Bank’s eligible-collateral page, with questions and additional supporting documentation directed to the eligible-securities mailbox. The form was launched at the end of June 2026 to replace the former ABS-CERT template and reduce the amount of information requested, without changing the overall transparency requirements.

Two features of the process deserve attention from anyone relying on eligibility. First, a submitted form does not itself establish eligibility. The Bank must determine the security’s eligibility before it can be delivered for use. Its published Level B and Level C lists are updated monthly, but the Bank expressly states that it is not bound by those lists. Submit the request early enough to obtain the Bank’s decision before planned use. Second, the Bank keeps discretion throughout. It states that it can change eligibility at any time, that it reserves the right to reject any security, loan portfolio or individual loan for any reason, and that it is not bound by the published eligible-securities list. The Bank also notes that where it has to carry out due diligence to determine whether an asset is eligible, those costs may be charged back to the Participant.

Eligibility, in other words, is a Bank decision. The published criteria tell a structuring team what will be considered; they carry no obligation for the Bank to accept a particular note.

Where deals lose Level B eligibility

The exclusions often speak more plainly than the inclusions, so each one is worth stating directly.

A third-party wrap does not help. Structurers sometimes assume a monoline or parent guarantee strengthens a note’s case; under the Level B rules a security whose credit quality rests on a third-party guarantee or insurance is excluded, the government-guaranteed instruments aside. An unlisted RMBS or ABS does not qualify for Level B regardless of pool quality. Private placement and listing status should not be treated as synonymous. A synthetic structure does not qualify: the underlying assets must be cash, not synthetic, meaning that they must not be derivatives. A re-securitisation does not qualify, because securitisations containing securitisations are not accepted. And a note that a Participant originated cannot be forced into Level B by presenting it as a market deal, because the Level B exclusion turns on whether the delivering Participant originated the underlying assets; such securities may be considered for Level C, subject to the applicable Level C criteria.

The tax-and-transfer condition is the one that gets missed on cross-border pools. Securities that give rise to registration charges, transfer taxes, VAT or similar charges on transfer are not eligible, which can surprise a team assembling a pool or a structure with a transfer mechanic that triggers such a charge. Checking the transfer treatment early is cheaper than discovering it at the assessment stage.

The Sterling Monetary Framework: a separate UK regime

The Sterling Monetary Framework is the Bank of England’s own collateral regime. The Bank remains independent in its assessment and accepts only collateral that it can value and risk-manage within its own risk appetite. For an ABS or covered bond, use the Bank’s eligibility-request process and obtain its decision before planned use as SMF collateral.

The geography written into the Level B rules is a reminder of that separateness. The Bank names UK and Dutch prime RMBS for Level B, and UK, US and EEA ABS for the credit-card and auto-loan classes. These are the Bank’s own perimeters, drawn for its own risk appetite, and they do not track any EU list. For UK-focused teams this is also where SMF work touches the broader UK reporting relationship the Bank maintains, including the reporting arrangements set out in the Bank of England and FCA memorandum on UK EMIR reporting. The through-line is that UK collateral eligibility is decided in London, on London’s criteria.

Frequently Asked Questions

Does a listing on any exchange satisfy the Level B condition?

The current Level B document states that unlisted RMBS and ABS are ineligible, but it does not identify a qualifying exchange or trading venue or state that admission to trading on any particular venue is sufficient. Confirm the proposed listing arrangement through the Bank’s eligibility-request process.

If our notes pay on a risk-free rate, are we clear of the benchmark exclusion?

The exclusion is specific to US dollar credit-sensitive rates, and the Bank names AMERIBOR, BSBY, CRITR and CRITS. What catches teams is that the test covers a rate the note may be required to reference, so a fallback clause that could switch a US dollar leg to a credit-sensitive rate can breach the condition even if the note pays on a risk-free rate today. The documentation, including the fallback waterfall, is where this is decided.

Can a retained, own-name deal ever reach Level B?

No, where the delivering Participant originated the underlying assets. Covered bonds and securitisations containing assets originated by that Participant are excluded from Level B and may be considered for Level C, subject to the applicable criteria. Retention or external distribution, by itself, is not the Bank’s stated test.

What credit quality does Level C actually require?

The Level C Collateral Securities document accepts the most senior tranches of eligible RMBS and ABS at a credit quality broadly equivalent to A3/A- or above, below the AAA-equivalent threshold Level B applies. Own-name RMBS and ABS are accepted at Level C, and the asset-class range is wider, taking in consumer loans, social housing loans and certain equipment leases alongside the classes Level B recognises.

Does being on the eligible-securities list guarantee a fixed haircut or continued eligibility?

No. The Bank refreshes the list monthly, states that it can change eligibility at any time, and reserves the right to reject any security, loan portfolio or individual loan and to depart from the published list. Haircuts are set by the Bank, which reserves the right to apply additional haircuts. The 11 June 2026 Market Notice’s 31 October 2026 haircut change applies to corporate bonds, not ABS or RMBS base haircuts.

How long does an eligibility request take, and when can we preposition?

The cited Bank materials do not state a standard processing time or make inclusion in the monthly published list the trigger for usability. A form submission is only a request; obtain the Bank’s eligibility decision before planned delivery. The Bank may charge due-diligence costs back to the Participant in certain cases.

Do the 2026 changes affect deals that are already eligible?

The 11 June 2026 Market Notice does not announce a 31 October 2026 change to ABS or RMBS eligibility criteria or base haircuts. Its 31 October changes concern corporate bonds. Existing ABS and RMBS should instead be checked against the current 18 June 2026 Level B or Level C criteria, the current haircut table and the ongoing transparency requirements.

Related Articles

• BoE SMF Collateral Eligibility Changes 2026: how the June 2026 Market Notice reshapes the Sterling Monetary Framework collateral set and haircuts.
• Liquidity Reporting: LCR, NSFR and ALMM: where prepositioned collateral fits within a bank’s liquidity and contingency funding reporting.
• SFTR Reporting Explained: the securities financing transaction reporting that sits behind repo-based central bank liquidity.
• BoE and FCA FMI Memorandum on UK EMIR Reporting: the UK reporting relationship the Bank operates alongside its market operations.
• PRA Basel 3.1 Market Risk and Pillar 3 Adjustments: the UK prudential rules that shape how held securities are capitalised.

Key Takeaways

• For Level B RMBS and ABS, the current criteria include the most senior tranche, credit quality broadly equivalent to AAA, listing and an eligible homogeneous cash pool. Eligibility is not irrevocably fixed at issuance: ongoing transparency requirements and the Bank’s continuing discretion also apply.
• Own-name securitisations and covered bonds cannot be Level B and may be considered for Level C, where the relevant securities criteria generally specify credit quality broadly equivalent to A3/A- or above.
• The benchmark exclusion covers US dollar credit-sensitive rates (AMERIBOR, BSBY, CRITR, CRITS) and reaches fallback language, so a note that may be required to reference such a rate can fail on the documentation alone.
• Securitisations and covered bonds must meet the Bank’s transparency requirements, consolidated in the 11 October 2019 Market Notice: anonymised loan-level data, freely available, on the Bank’s per-asset-class template and kept current.
• Eligibility for a Level B or Level C ABS or covered bond is requested through the Bank’s interactive form. The published lists are updated monthly, but the Bank states that it is not bound by them; obtain the Bank’s eligibility decision before planned use.
• The Bank keeps full discretion: it can change eligibility at any time, reject any security or loan portfolio, and is not bound by the published list.
• The 11 June 2026 Market Notice set separate dates: 19 June 2026 for government-linked eligibility and index-linked sovereign haircuts, end-June 2026 for the new ABS and covered-bond request form, and 31 October 2026 for corporate-bond eligibility and haircuts.
• SMF eligibility is a Bank of England decision on UK criteria and does not follow from ECB or Eurosystem eligibility.

Sources and References

• Bank of England, Sterling Monetary Framework, Level B Collateral Set (18 June 2026): https://www.bankofengland.co.uk/-/media/boe/files/markets/sterling-monetary-framework/level-b-collateral.pdf
• Bank of England, Sterling Monetary Framework, Level C Collateral Securities (18 June 2026): https://www.bankofengland.co.uk/-/media/boe/files/markets/sterling-monetary-framework/level-c-collateral-securities.pdf
• Bank of England, Eligible collateral (eligibility criteria, eligible-securities list and request form): https://www.bankofengland.co.uk/markets/eligible-collateral
• Bank of England, Market Notice: Changes to collateral eligibility in the Sterling Monetary Framework (11 June 2026): https://www.bankofengland.co.uk/markets/market-notices/2026/june/collateral-eligibility-in-the-smf-11-june-2026
• Bank of England, Market Notice: Detailed transparency requirements for asset backed securities and covered bonds (11 October 2019): https://www.bankofengland.co.uk/markets/market-notices/2019/detailed-transparency-requirements-for-abs-and-covered-bonds-october-2019
• Bank of England, Summary table of collateral: https://www.bankofengland.co.uk/-/media/boe/files/markets/eligible-collateral/summary-table-of-collateral.pdf
• Bank of England, Summary of haircuts for securities eligible for the Bank’s lending operations (18 June 2026): https://www.bankofengland.co.uk/-/media/boe/files/markets/eligible-collateral/summary-tables-of-haircuts-for-bank-lending-operations.pdf
• Bank of England, Market Operations Guide: Our tools: https://www.bankofengland.co.uk/markets/bank-of-england-market-operations-guide/our-tools
• Bank of England, Update to Discount Window Facility pricing, Market Notice (27 March 2026): https://www.bankofengland.co.uk/markets/market-notices/2026/march/update-to-discount-window-facility-pricing-market-notice-27-march-2026

What to settle before your next deal signs

Before a UK ABS or RMBS is signed off, test it against the complete current Level B criteria: an eligible jurisdiction and asset class; the most senior tranche; the highest credit quality, broadly equivalent to AAA; the specified homogeneous prime pool; listed status; cash rather than synthetic underlying assets; no disqualifying third-party wrap, re-securitisation, own-name assets or US dollar credit-sensitive-rate exposure; an eligible denomination and settlement capability; no disqualifying charges on transfer; and compliance with the Bank’s complete transparency requirements. Meeting those published criteria does not establish eligibility: submit the Bank’s request form and obtain its decision before planned delivery or use. If the delivering Participant originated the underlying assets, the security is excluded from Level B and may be considered for Level C, where the relevant RMBS and ABS criteria specify credit quality broadly equivalent to A3/A- or above and the applicable haircut schedule and add-ons apply. For ABS and RMBS, use the current 18 June 2026 Level B and Level C criteria, the current request form and the ongoing transparency requirements. The 31 October 2026 changes in the June Market Notice concern corporate bonds, not ABS or RMBS eligibility criteria or base haircuts.

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.