The Bank of England convened a committee to discuss the UK securities lending market, addressing industry preparation for major operational changes and emerging risks that could reshape how the financial sector operates.
Industry participants are broadly on track for implementation in October 2027, but the Bank of England noted significant differences in readiness between firms. Operational challenges around securities lending recalls, collateral sourcing, funding, settlement timing, partial settlements and agent lender capabilities persist across the sector. The Bank of England observed that T+1 accelerated settlement could amplify existing issues should firms fail to adapt their systems and processes.
The committee highlighted that future competitiveness may depend on collateral agility, automation, real-time processing and the ability to support same-day operational workflows. Members stressed that T+1 readiness extends beyond mere compliance and requires scalable operating models capable of supporting future market changes. The Bank of England also noted increased operational challenges created by holding-period rules and record date requirements across different national tax regimes, underlining the need for greater tax harmonisation and monitoring of tax-related risk across jurisdictions.
The committee discussed how digital assets and tokenisation programmes could reshape financing markets, with multiple industry working groups examining repo, collateral mobility, payments, legal frameworks and digital securities issuance. Members noted growth opportunities in newer markets and the growing importance of digital asset initiatives. The group also observed increased use of central counterparties, collateral efficiency mechanisms and smart collateral structures, though practical use cases remain a critical challenge.
The Bank of England flagged concerns about artificial intelligence adoption in the sector. While current AI use has been primarily efficiency-driven, focusing on administrative tasks, information retrieval and data aggregation, members expressed concerns around its use in governance, resilience, vendor oversight and data security, particularly if AI systems gained access to sensitive operational data.
For borrowers, lenders and investment funds, upcoming regulatory developments, mandatory clearing requirements and operational changes could affect how they access funding and manage collateral over the coming years.