market value ( amv ) of securities that any single issuer delivers to the bank as wider collateral in omos is less than the greater of £250 million or 25 % of its total omo collateral delivered. other recent policy initiatives the bank has, for a number of years, been refining and improving its collateral policy. in november 2010, the bank announced that it would allow counterparties to use “ raw ” ( i. e. unsecuritised ) loans as collateral in the dwf. by removing the need to securitise assets, that initiative expands the range of collateral that banks would be able to use in times of stress. and, by removing derivatives and certain structural features embedded in rmbs, it will improve the bank ’ s ability to manage the risk associated with this collateral. moreover, this initiative will also allow smaller counterparties, who do not have access to securitisation platforms, or for whom the cost of securitisation is prohibitively high, to access liquidity insurance in times of need. 9 the bank started processing applications for the pre - positioning of loans in the dwf in january 2011. at the same time as announcing that it would accept portfolios of loans as collateral, the bank formalised the next steps in its abs transparency initiative. following on from its consultation in march 2010, the bank announced that it would be phasing out the eligibility of residential mbs and covered bonds that did not conform to certain transparency criteria. during a year - long implementation period, running to november 2011, those securities that do not confirm to the new standards will remain eligible for use in the bank ’ s operations. but over that period, counterparties should be working to ensure that they meet the new transparency requirements. subsequently, in the year from november 2011 to november 2012, there will be a 12 month transition, during which the bank will begin to apply increasingly large haircuts to those securities that do not conform to its requirements. by the end of november 2012, assets that do not comply will become ineligible. the transparency initiative will help the bank risk - manage collateral more accurately and effectively. that means that less conservative haircuts would sometimes be required to support a given level of borrowing. that will benefit counterparties as well as deliver risk management benefits to the bank. the bank will also require the data to be made available to investors and other market professionals, so that they will be able to undertake their own risk analysis.

that should deliver longer - term benefit to the financial system as a whole – standardising, simplifying and publicising the data should all reduce the mechanical reliance on third party judgments and the counterparty can meet the margin call by either providing more collateral, substituting some of the existing collateral with higher quality assets which receive a smaller haircut, or returning some of the lent funds. the aim would be for the bank ’ s risk tolerance to be broadly the same for loans as for a securitisation of those same loans, so as not to provide incentives to submit one form of collateral over the other. bis central bankers ’ speeches models, and hence reduce “ single points of failure ” within the abs market ( although it will be up to market participants to make best use of these changes ). other policy issues on the agenda there are some big issues facing the bank and its collateral management going forward. the immediate challenge is to wind down the sls to its conclusion in january 2012. the banks have made good, early progress in reducing their use of the scheme, unwinding the collateral swaps ahead of their contractual maturities. as the remainder of the t - bills lent are returned, the collateral pledged to the bank will be returned to these counterparties for refinancing in the market. much of the collateral posted under sls was rmbs and residential mortgage - backed covered bonds, where conditions in the secondary and repo markets have improved since the financial market seizure beginning in 2007. it is expected that the banks will be able to generate liquidity using their mortgage assets in the private market or by raising funding through other markets. it is noteworthy that the private sector has recently engaged in sls - like transactions ; pension funds have been agreeing to swap highly liquid gilts for less liquid rmbs. the pension fund, as a buy and hold investor, is content to hold a less liquid asset on repo for a higher yield. the bank in the meantime receives a highly liquid asset that can be used to raise cash in the repo market, or held as part of their liquid asset buffer. it will be interesting to see how that private sector collateral upgrade market grows and develops and, in particular, the increased transparency helps pension funds better manage the risks in the collateral. conclusion when people think about bank of england policy questions, many rush to focus on interest rates and, given our new responsibilities, financial policy decisions. fewer think about the policy issues associated with implementing those decisions