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Bank Of England May Accept Stocks As Collateral
Way back in October of 2009, a little over one year after the collapse of Lehman froze money markets and nearly brought down the entire global financial system, we brought you a rare and fascinating look at what goes on at the Fed’s discount window when financial armageddon is playing out before everyone’s very eyes.
We won’t delve into the specifics now (you can revisit them for yourself here), but suffice to say that in the days after Lehman's bankruptcy, over $50 billion in securities had been assumed by the Fed via FRB and DTCC programs, which also included anywhere between $3 billion and $4.5 billion in equities. In other words: the Fed was lending against a portfolio of stocks (which amusingly included 5,136 shares of recently bankrupt retailer Shaper Image).
Seven years later and it appears as though the UK is set to dust off the Fed’s Lehman lending playbook because as The Telegraph reports, the BOE is looking at making equities eligible for repo ops. Here’s more:
Banks could be able to offer the Bank of England shares as collateral under a scheme being considered by officials, executive director Chris Salmon has revealed.
Currently, banks can offer assets such as asset-backed securities, government bonds and pools of loans as collateral to ensure the central bank does not lose its money. In future, they could be able to offer shares, too.
Although the haircut on equities has not yet been decided, it is likely to be substantial. Share prices are volatile, and could be prone to particularly large swings just at the time a bank might want to offer equities to access Bank of England funding.
"The Bank has started work to ensure there are no technical obstacles to our ability to accept equities as collateral should the need arise," said Mr Salmon.
“Given the complexities involved, the project will take some time to deliver, and we currently anticipate that work to remove technical obstacles will continue throughout 2015 and 2016.”
The Bank's acceptance of a very wide range of collateral has formed a key part of the Funding for Lending Scheme since 2012, alongside emergency funding schemes in which banks have limited access to affordable funding from the market.
Ostensibly, the shift will simply give banks "more options" when it comes to obtaining funding for lending, but the question here seems to be this: where's the fire?
That is, what's prompting the BOE to study ways around any "technical obstacles" that might prevent it from accepting stock in repo ops?
It seems as though someone, somewhere, may have a liquidity problem and suddenly needs to put up its equity book for cash. File this one away in the box labeled "possible black swan" for now. We imagine we'll be revisiting it in the not-so-distant future.
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That's about it HH. Banking is such a fucking scam, yet here we are.
BOJ should accept Drachma as collateral.
Pretty soon they will be taking Kazakhstani Pubic Hair as collateral.
I thought the headline was "BOE will accept Socks as collateral"...
That too.
Beanie Babies, at FULL value*.
*Full value is defined by the highest Ebay auction for each particular item. In lieu of proof of an actual auction settling price, a simple guesstimate will work.
-Goldman Sachs
I believe that was written by Carney himself when he was at Goldman.
... and along with Carney, here's the rest of the other ex-Squidlets >>> https://en.wikipedia.org/wiki/List_of_former_employees_of_Goldman_Sachs ...
Thanks Tom, you made my day.
I have boxes of baseball cards and Playboy magazines from the 90s. I was wondering if these can be used as collateral as well since they are all made of paper after all.
might be worth more then EURO's and YEN
Sadly we have the Internet now so Nay, VEERILY WE WANT FOR EVEN PORN AS MONEY AS THERE IS TOO MUCH OF THAT EVEN.
Looks like Kentucky Bourbon...fine Scotches, Finalndia Vodka tho...
How many publicly traded companies actually increase net economic productivity?
I envision a world in the not so distant future where all publicly traded companies merely trade one another's stock, where all the books are cooked, and where nothing is produced. I shall call this world "paradise".
totally crazy that they are floating trial ballons for equities as collateral. Likely assessing what kind of whisper generates.
there must be a very real shortage of clean collateral in the world. get long Treasuries if you can.
NoVa
I love how they just come out and call these plans "schemes." No one can say that central banks are being disingenuous.
Keep your candy bar wrappers: next they will be accepted as GBP1,000 notes by BOE.
And who will take your "vaunted English Pounds" then young man?
Still...I like your moxie!
Here's five dollars now to play in the sandbox with your friends!
Desperate Measures before the Kiss of Death!
How about futures contracts?
Dumbasses.
Stock price discovery is a magician pulling a rabbit from his hat.
Cash for Trash II, the sequel.
It rubs the lotion on the FTSE.
Comparatively the FTSE has done fuck all for quite some time. This is the little kick in the ass that it needs.
Absolutely brilliant! Nothing is more stable than a share of stock, now pass the crack pipe......
Banking so so f'n corrupt, that they're essentially screwing themselves now.
Pickens must be getting pretty slim. . .
They wanna say " Gold " they just can't bring themselves to actually say it...
Tick Tock assholes...
Just say Uncle instead...
I want to say "unbelieveable," but they have managed to completely dull my sense of surprise anymore.
Of course the BOE would take stocks as collateral.
Holding IOU stocks at a unknown closing price as collateral, this is rich. Can we use are old Enron stocks?
They wont be happy untill they own everything including our souls
All about the haircuts... and the daily vol per name
Numbers 1 thru 4, elvis, mullet, teddy boy, toy boy, hippy, etc etc
I think hippy hair cuts are out, way too long, probably 90% equity allowed per 100% "secured" borrowings for shares in a company in the top10 of market caps
No 1 = 25% per 100% ... for Bitcoin, Apple and Netflix :)
Do Chinese stocks qualify?
In other news:
Jesus Was Gay, "Or At The Very Least" Queer, Professor Sayshttp://www.abovetopsecret.com/forum/thread1075133/pg1
Search your attic and safekeeping box. You might find a old gem to use as collateral.
http://www.equities.com/editors-desk/investing-strategies/shorting/famou...
Not a bad deal accept stock in exchange for counterfeit money.
Unlock the hidden equity in your equities! It makes no sence to have equity in your equities, whey you can use it to by MOR STAWKS!
Crazy! A place to dump your worthless, toxic assest.
o yeah, what can go wrong ? ha ha ha why don't they take bitcoins also :-)
We need a printing press for stock certificates.
Isn't that called shorting? You know, like they do for gold and silver now, just dump contracts in mass, into the system?
Beats digging a Ditch! s/c
The problem with Greece is that its full of Greeks, time to reinstitute the right of Prima Nocta.
What happens after the M&A and stock buy backs takes a shitter do to low consumer spending? Answer: they'll change to calculated model formula.
/ROFL
repo = spot sale + Forward contract.
Collateral is the name of the game and past experience shows us that mortgage back securities of CDO/DCS type was the devil's soup. Stocks of Oligarchy market pumped on HFT fall into the same whirlpool of "free hand" wankomania, that even the von Mises institute can't cure with diehard goldbuggery.
Maybe what the banks are saying : we are damn scared of Grexits and blockchain monetary and even stock plays out of our control...
WHen banks get scared of dying by a thousand cuts from the open market; if the Oligarchs allow the Net to grow it !
I just received blockchain instructions from a ZH Poster yesterday. I have to wait until I return home to Charleston, SC. I need my printer. Fuck these banking cunts.
;)
How bloody selfless of them
WE demand, give US, 640 QUADRILLION deutsche marks.
Seeing as YOU (the world) don't have it, WE'll accept 29.99 APR monthly interest only payments from ECB, with all humans hypothecated as collateral.
Shotgun love, Alexis.
Can't wait for the head of the BoE to state that the stocks will be valued higher than current market rates due to temporary market conditions undervaluing them. The same reason why mark to market was killed off quietly.
Taxpayers always love to catch falling knives.
I have a lottery ticket that MAY be worth 10 million dollars! That should be good enough to collateralize a 1 million dollar loan. I'll take that in 20's please.
I need help.
Sooo.... the Fed Buys treasuries through middle men and gives the US cash to function with. The Fed holds the treasuries as IOUs.
We have already left the realm of earth with the check kiting scheme described above.
The banks get easy money to lend. The money is borrowed and stocks are bid up. Have I got this everyone? Have I?
NOW, I'ma gonna take my stocks, which are valued so high because they are bid up by treasury/fed largess, anda I'ma gonna use those stocks as collateral to get cash?
Have I got this, have I? Huh?
Fiat, is already fiat. Fractional reserve lending already means I only have a "portion" of the fiat currency in my bank, any way. Then the Fed buying treasuries, and now this.
This is Mobius, Ouroboros, Escher banking.
My head is officially so fucked, it cannot be unfucked.
Holy hell.
This is why Greece was put on a minimum cash withdrawal allotment. The bankers really don't have to money in which they proclaim to hold. Market to fantasy economics.
"This is Mobius, Ouroboros, Escher banking. "
Fractional Reserve has been exhausted.
Leverage maxed out.
Derivatives have been pyramided to da Moon.
Interest Rates are ZIRP/NIRP.
MOAR lending against phantom collateral and counterfeiting are the only possible ways to keep deflation from balancing the balance sheets and collapsing the leverage -which will destroy the corporate tax avoidance and subsidy machines of .01% oligarchs, the global debt-based banking and trading system, and the unsustainable governments...
Free Markets are now called Chaos and have been criminalized by the governments.
ANARCHY & WAR are inevitable.
There is still hope for my pile of dried squirrel pelts. Come on BOE!
Roadkill might become a viable form of monetary leverage.
/sarc
FaceBank
Google British Pound
Amazloan
Great Buyback Pound
Well, I suppose a crash in equity prices would be a 'technical obstacle', so I guess we can expect a steadily-rising market as a result...
Why ANYONE would keep ANYTHING of value in this insane system is beyond me...There isn't a single investor out there who can be sure of what the actual value of his portfolio IS anymore. Basically, it is what they SAY it is, until it isn't anymore.
And they laugh at those of us who stack gold and silver...go ahead, keep laughing, joke-boy. I'll join you when the whole Ponzi comes crashing down. I'll be laughing all the way down to the bottom of the lake when I go to withdraw MY money from the system I chose to trust...
The next step is to chip you. This is why no one goes to jail for commiting fraud.
Let's all get chipped, drunk, and stupid - RFID ...
Cell phone = chip.
Lots of stocks are of far higher quality than most of what exists in the bond market. So what's the problem? Sure beats underwater subprime mortgages.
"Lots of stocks are of far higher quality than most of what exists in the bond market. So what's the problem? "
IF the stock has value it could simply be traded at Market for funds.
This is purportedly what an IPO is designed to accomplish.
The only reason that equity would be sold directly to the BOE with a haircut is that is cannot be sold at that haircut price or better at Market, hence the only logical reason for ANY such sale is going to be an overpayment for the equity.
It should be noted that the BOE is not the Exchecker/Treausury.
This is not the nationalization of shares, it is the private Banking Cartel counterfeiting to purchase assets at a premium to Market.
-& why not pay a premium if the damned 'funds' are just being counterfeited.
This is even worse than the combination of suspension of MTM accounting and Maiden Lane counterfeiting.
WHO owns most of the equity? -They are the ones that will first be overpaid to sell in a crash and secondly provided with excessive liquidity with which to scoop up all of the distressed equity that others will have to sell at a Market prices or discounts.
It is a counterfeiting by which the oligarchy will be guaranteed to be both overpaid for selling their holdings and granted deep discounts at Market.
YOU & I will not have the option to sell stock directly to the BOE for a higher price than it is trading at in the Market!
Further... Corporate Taxes.
IF the BOE owns stock and receives dividends or sells at a premium does it pay capital gains?
If BOE sells at a loss -despite the absolute certainly that it did not value or 'haircut' the equity as deeply as Markets would- does the BOE get a tax rebate or defferal of some kind which it can also sell or option?
The insanity and desperation is really mind boggling.
Lawyers and bureaucrats are going to have a field day and get paid crazy sums arguing over and admistering this outrageous criminal madness..
First of all, when a bank lends against stock, it doesn't take ownership of the stock. It merely holds the stock in exchange for loaned cash, as collateral. So dividends would not be payable to the bank.
Additionally, the argument you make could apply to literally all collateral taken by the bank in exchange for lending. It doesn't uniquely apply to equities.
Only point I agree with you is on the last, that they're going to waste insane amounts of money on 'due dilligence'.
LET ME BE CLEAR.
Although the article states 'BOE may accepts stocks as collateral' I do not see any language pertainant to repo markets.
Rehypothecation at market should be sufficient. The only reason that it wouldn't be is that Banks wouldn't want to book profits or losses from outright sale for one reason or another, and do not trust counterparties to unwind Repo when and as agreed/called to.
I therefor assume that these will in fact be de-facto sales disguised as repos as the repos will never be unwound ala The FED purchases of MBS.
I can see no reasoned argument favorable to Central Bank purchases of equity at above market price using leverage generated out of thin air.
These indeed appear to be OMT operations designed to overpay politically connected bankster/speculators.
The only reason to Repo and/or sell directly to the BOE is to get a higher price/better terms than the Market will provide.
Such activity has nothing to do with monetary policy or market disciple.
Sure, there will be attempts to put turds into the banks. But is there really anything wrong with central banks writing loans against the stock of valuable industrial companies? I'd rather the ECB have shares of ThyssenKrupp as collateral for its lending, than Greek MBS or whatever random mortgage crap comes out of Spain, Italy, or Portugal.
Fascist stocks are as good as gold.
I say what what? arrest that canadian!
Wonderful. When they run out of cash to buy stocks back,they can print worthless stock and issue it to BOE. That should goose the FTSE to the farthest galaxieseLet me know when it's a done deal and I can become a billionaire too
Now is a good time to start a shell LLC and IPO it at $50/60 per share.
So when the next correction happens even more will be owned by the .0001%. The people will bailout the banks with bail ins and the owners will just print themselves £5 trillion basically owning the stock for nothing.
Insolvent Banks run by known criminals ( LIBOR rigging , etc. ), recently bailed out by displacing their losses onto Sovereign/Taxpayer balance sheets, counterfeiting to buy real assets.
In nomine patris, et fili, et spiritu sancti...
Don't they already take blocks of cheese and bits of string, and shoes in need of new soles?
George Osborne is likely behind this. He's does moronic things like this.http://positivemoney.org/2013/06/george-osbornes-help-to-buy-scheme-a-mo...
Buy to let for Stawks!
This is great
What about those who do share buyback with QE money
And artificially raised their share prices too
This is the last straw
Watch it ,
(1) banks use stocks as collateral
(2) everybody jumps in and takes more loans using stocks
(3) more loan means more debt
(4) no one buying stocks ('cause too high & no more liquidity)
(5) sell sell sell
(6) Crash crash BOOM
All Fall Down