BoE eases bank leverage rules

The United Kingdom — Bank of England (BoE) announced plans to relax capital rules for UK banks, primarily by softening the leverage ratio and enhancing the usability of capital buffers. The changes aim to align UK requirements with international standards and reduce competitive pressures following a similar relaxation in the US. The United Kingdom — Monetary Policy Committee (FPC) proposed removing the Countercyclical Leverage Buffer and making other buffers releasable during stress, estimating a 0.2 percentage point reduction in leverage requirements for large British banks. The changes will affect domestically focused lenders like Lloyds, NatWest Group, and Banco Santander, while global banks such as HSBC, Barclays, and Standard Chartered face a higher leverage requirement for their investment banking operations. Some FPC members expressed concerns about potential increases in market-based leverage. The BoE also highlighted risks from AI, cybersecurity, and high leverage in debt and equity markets. The Association for Financial Markets in Europe welcomed the changes.