For fifteen years, one principle has sat at the foundation of liquidity regulation: your buffer has to be your own. The central bank is a backstop, deliberately kept outside the ratios, on the logic that a bank must be able to survive a crisis without assuming it will be rescued. In March 2026 the PRA proposed to change that. CP5/26, “Modernising the liquidity policy framework,” would let a bank’s drawing capacity at regular Bank of England facilities count toward its liquidity adequacy. It is the biggest UK liquidity policy event since the framework was built, and if it is adopted, the UK becomes the first major jurisdiction to bring the central bank formally inside the fence.
The consultation has two main limbs. The first revises the Overall Liquidity Adequacy Rule (OLAR), the UK’s requirement that a firm hold, at all times, liquidity resources adequate in amount and quality. CP5/26 adds buffer composition to that test, so it is not just how much and how good, but how the buffer is put together.
The second limb is the headline. Today the OLAR explicitly excludes central-bank emergency liquidity assistance from the resources a firm can count. CP5/26 proposes that drawing capacity at the Bank of England’s regular facilities, its ordinary Sterling Monetary Framework operations rather than emergency rescue lending, should count toward liquidity adequacy, subject to strict operational-readiness conditions: collateral pre-positioned at the Bank, and access that has been tested rather than merely assumed. Consequential changes would follow to the PRA’s core supervisory statement and its Pillar 2 liquidity policy. The consultation closed in June 2026, and final policy is pending.
To see why this matters, recall the post-2008 settlement. The LCR was built on the premise that a bank’s buffer must be composed of assets the bank itself owns and can monetize in private markets. The central bank stands behind the system as lender of last resort, but regulation deliberately does not let banks count on that rescue: the buffer must survive a market freeze on its own. Counting central-bank capacity inside the framework partially reverses that choice. It treats the central bank not purely as an external backstop but as a recognized source of liquidity that sits, in part, in the numerator.
That is a genuine philosophical shift, not a technical tweak, which is why it is being watched well beyond the UK.
There is a serious argument that the orthodox position has become unrealistic, and CP5/26 is its clearest expression.
Start with the buffer usability paradox. Banks are extremely reluctant to spend their own published buffers in stress, because visibly drawing them down signals distress and can accelerate a run. A buffer nobody dares use is not, in the moment that matters, much of a buffer. Central-bank capacity, by contrast, is genuinely usable, especially if the stigma around using it is removed. The Bank of England has spent recent years trying to do exactly that: cheaper and simpler Discount Window Facility pricing, explicit de-stigmatization messaging, and a push for collateral to be pre-positioned at scale.
Then there is the operational lesson of 2023. One of the clearest failings at Silicon Valley Bank was that it could not mobilize collateral to the central bank fast enough when it needed to. Pre-positioning collateral and testing access are now understood as real parts of liquidity risk management, not administrative afterthoughts. CP5/26 rewards precisely that readiness by letting it count, which aligns the incentive with the behavior supervisors want to see.
Put together, the case is that recognizing tested, pre-positioned central-bank capacity reflects how liquidity actually works in a modern crisis, and channels banks toward being genuinely ready to use the backstop rather than hoarding self-owned buffers they will freeze at the worst moment.
The counter-argument is equally serious, and it is about moral hazard and comparability.
Bringing the central bank into the numerator risks encouraging reliance on it. If drawing capacity counts toward adequacy, a bank can hold a thinner stock of its own liquid assets, leaning on the expectation of central-bank support, which is close to the dependency the post-2008 rules were written to prevent. It also blurs the line between ordinary liquidity management and lender-of-last-resort support, a line central banks have historically guarded carefully. And it weakens international comparability: if the UK counts central-bank capacity and other jurisdictions do not, two banks with identical published ratios are no longer really comparable, undermining the whole point of a globally consistent framework.
The operational-readiness conditions are the safeguard here. By requiring pre-positioned collateral and tested access, the PRA is trying to ensure that only genuinely available capacity counts, not a vague assumption of rescue. Whether those conditions are tight enough to contain the moral-hazard risk is exactly what the consultation debate is about.
CP5/26 does not stand alone. The United States is moving in the same direction through its “liquidity reset,” which proposes capped recognition of pre-positioned discount-window capacity in the LCR, though that remains at pre-proposal stage. The UK, with a formal consultation now closed, is ahead. The European Union, so far, is holding the orthodox line and keeping the central bank outside the framework.
This is the fault line to watch. If the UK and US both adopt and the EU does not, the three regimes diverge on one of the most foundational questions in the framework, and the comparability that was the founding purpose of the Basel approach is materially weakened.
For UK firms, the practical implication is immediate even before final rules: operational readiness to use Bank of England facilities is becoming strategic rather than a box-ticking exercise. Collateral pre-positioning, tested access, and the ability to demonstrate both are moving from good practice to potential balance-sheet value. Firms that have treated the discount window as a taboo of last resort will need to rethink, because under CP5/26 the readiness to use it is precisely what earns recognition.
Institutions preparing for this shift can use Mirai ALM & Liquidity to model buffer composition scenarios, including the contribution of central-bank drawing capacity, alongside existing LCR and stress-testing calculations, within a single auditable framework.
CP5/26 proposes to let regular Bank of England drawing capacity count toward UK liquidity adequacy, subject to pre-positioned collateral and tested access, alongside a revised OLAR that adds buffer composition to amount and quality. It would be the first formal break with the post-2008 principle that buffers must be bank-owned and the central bank stays outside the ratios. The case for it is realism and the buffer usability problem; the case against is moral hazard and lost comparability. With the consultation closed in June 2026 and final policy pending, the UK is poised to move first, the US is close behind, and the EU is the orthodox holdout. However it lands, it is the most consequential liquidity debate of the year.
For a full breakdown of the LCR, NSFR, ILAAP and the reporting frameworks across Basel, the EU, the UK and the US, read the complete guide "Liquidity Regulation: From Zero to Expert." Download the complete guide.
To see how Mirai Regulatory Reporting helps institutions automate LCR, NSFR, ALMM and other liquidity returns from a single data source while keeping every calculation auditable, learn more here: https://mirairisktech.com/regulatory-reporting.