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Bank of England Pares Banks’ Capital Requirements

BoE wants banks to keep lending and discourage insurers from dumping corporate bonds.
Christopher HosfordJuly 5, 2016

The Bank of England, in an attempt to mitigate fallout from the United Kingdom’s vote to leave the European Union, has lowered the amount of capital banks must hold in reserve, Reuters reported. The goals are to enable banks to keep lending and to prevent insurers from getting rid of corporate bonds.

The easing of special capital requirements for banks potentially frees up $198 billion for lending to businesses and households, the Reuters report said.

“The U.K. has entered a period of uncertainty and significant economic adjustment,” BoE governor Mark Carney told the Wall Street Journal. “The bank has a clear plan. We are rapidly putting its main elements in place. And it is working.”

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Bank of England said it “strongly expects” banks to support the economy with fresh loans, according to the WSJ report.