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Edge Of England In a significant relaxation of rules following the financial crisis, banks have cut their estimates for capital reserve levels to prevent their collapse.
Under the Bank’s proposals, new capital requirements for banks would be reduced from about 14% to 13% of risk-weighted assets.
It refers to the amount that banks must set aside as a buffer against risky loans and investments to protect against any losses.
Rules were introduced after the 2008 financial crisis to prevent banks from taking excessive risks and help protect them from failure.
of the bank financial policy committee (FPC) said the lowered benchmark should mean banks have greater certainty and confidence in using their capital to lend to UK households and businesses.
Its decision was “in line with the evolution of the financial system” since it first assessed capital requirements a decade ago.
The FPC found in its review that UK banks are now less at risk on their balance sheets than at the beginning of 2016.
They also tend to have more capital than is required.
The FPC said its updated requirements were in line with its view that the UK banking system is resilient and can support households and businesses even if economic conditions deteriorate significantly.