Bank of England to loosen capital rules for lenders

The Bank of England yesterday announced plans to loosen capital rules for high street banks for the first time since the 2008 global crash.

- Kalyeena Makortoff

It intends to lower capital requirements related to risk-weighted assets by 1 percentage point to about 13%, reducing the amount lenders must hold in reserve.

Capital requirements act as a cushion on balance sheets against risky lending and investments.

The Bank's lower requirements, which are due to come into force in 2027, are designed to make it easier to lend to households and businesses.

However, the move could stoke concerns over any weakening of protections against bank failures.

When asked whether the Bank was sowing the seeds of the next financial crisis, its governor, Andrew Bailey, said the proposal on capital rules was a "sensible reflection of the health of the banking system".

He added: "I understand fully that the financial crisis is disappearing into the rear view mirror ... but we do have to continue to maintain the lessons of the financial crisis.