BoE eases bank capital requirements in bid to boost growth

Britain's central bank on Tuesday cut the amount of capital it estimates lenders need to hold, making its first reduction to bank capital demands since the global financial crisis in a bid to boost lending and stimulate the economy.

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The Bank of England (BoE) said its capital framework review showed that the benchmark for Tier I capital requirements for lenders, set at 148 since 2015, could be reduced by I percentage point to 138.

BOE Governor Andrew Bailey later said that the change in how much capital banks must hold to protect themselves against potential shocks reflected both “the evolution of the banking system and... (current) economic conditions”.

He told a press conference he was not worried that lower capital requirements would help sow the seeds of the next financial crisis.

Banking executives and investors had expected some sort of an easing in recent weeks after earlier signals from central bank officials and as rival supervisors, including in the United States, prepare to soften their rules. Analysts described the BoE changes as important but measured.

In its half-yearly Financial Stability Report, the BoE also said it would launch a review on enhancing the usability of buffers and on the implementation of the leverage ratio, initiatives that could further ease requirements for lenders.