Bank of England consults on letting CCPs accept uncollateralised letters of credit as margin

The Bank of England is proposing to let UK CCPs accept uncollateralised letters of credit as initial margin collateral, a change rooted in the 2022 energy-market margin spikes. The consultation removes the full-backing requirement, extends eligibility to non-financial clients, and layers on new concentration and due-diligence safeguards. For clearing members, issuing banks and corporate hedgers, it reshapes how margin obligations can be met.

• The Bank proposes removing the requirement that commercial bank guarantees be fully collateralised before a CCP can accept them as initial margin.
• Non-financial counterparties clearing as clients, not only clearing members, would become eligible to post LOCs, enabling pass-through models.
• The single-issuer concentration limit would be cut from 10% to 5% of a CCP's total collateral, and the option to raise it to 25% removed.
• Eligible issuers would be restricted to authorised UK credit institutions or authorised overseas credit institutions, with ongoing creditworthiness monitoring required.
• Responses are due by 15 January 2027; final rules are proposed for 2027 H1 with no implementation period.

Executive summary

The Bank of England published a consultation paper on 15 October 2026 seeking views on permitting central counterparties (CCPs) to accept uncollateralised letters of credit (LOCs) as initial margin collateral, together with the risk mitigants CCPs would need to implement.…

Machine-verified against the primary source, then read, edited and published by the Regulus editorial desk on 19 Oct 2026.