Bank of England Tightens Collateral Rules Against Thermal Coal

The policy change forces commercial banks like Barclays, Lloyds, NatWest, and HSBC to rethink their holdings if they wish to access liquidity from the central bank. By discounting the value of these bonds, the Bank of England is effectively pricing in the long-term financial risks of the global transition to net-zero emissions. While the decision was released without a formal public announcement—partly to avoid political friction regarding energy policy—it marks a departure from the practices of other regulators, such as the European Central Bank.

Ellie McLaughlin of the advocacy group Positive Money noted that while the move sends a potent signal to the financial sector, the Bank remains cautious about its broader climate strategy. This regulatory tightening arrives as recent data from the London School of Economics reveals that major global banks are struggling to maintain their decarbonization commitments, with many softening their climate language from firm targets to mere aspirations. Despite this industry-wide hesitation, the Bank of England’s decision reflects a growing consensus that coal assets are becoming structural financial liabilities.