As part of an ongoing review of the Bank’s collateral policy related to the Standing Liquidity Facility (SLF), the Bank is announcing several changes to the assets accepted as collateral under its SLF.

Consistent with the recommendations of the Financial Stability Board’s principles announced in October 2010 the Bank is removing from the policy all mechanistic reliance on credit rating agency ratings in determining the acceptable credit quality of eligible assets, however external credit ratings can still be a factor in determining the credit quality of any assets. The following are specific changes to securities that relied on credit rating agency ratings and are effective immediately:

Private sector securities must meet the criterion of sufficiently high quality as determined by the Bank. With the exception of Term Asset-Backed Securities (ABS), Asset-backed commercial paper (ABCP) and Covered bonds, sufficiently high quality will be broadly equivalent to a rating of A- or above.



Term ABS, ABCP and Covered bonds must meet the criterion of sufficiently high quality as determined by the Bank. Sufficiently high quality for these securities will be broadly equivalent to a rating of AAA.



Securities issued or guaranteed by a provincial government must meet the criterion of sufficiently high quality as determined by the Bank. The Bank will not provide specific credit guidance for these securities. As such, to provide eligibility information to the market, the Bank is introducing a list of eligible provincial issuers. This list will also include information on any additional risk mitigants on these securities that the Bank may apply.

Eligibility decisions on securities other than provincial issued or guaranteed securities will be communicated directly to the pledger at the time the assets are presented to the Bank for consideration.

The Bank is taking further measures to those announced on 13 March 2014 to reduce the Bank’s exposure to wrong-way risk as per the Principles for Financial Market Infrastructures (PFMIs), by removing from eligibility, securities issued or guaranteed by Large Value Transfer System (LVTS) participants, excluding those that are backed by other assets. There will be a 2 month adjustment period for counterparties to adjust to the removal of securities issued or guaranteed by LVTS participants.