Bank of England proposes easing bank capital rules

(Sharecast News) - The Bank of England on Tuesday unveiled a package of proposed reforms to the UK bank capital framework, which it said is designed to make the regime simpler, more effective and better aligned with international standards.

The Financial Policy Committee (FPC), working alongside the Prudential Regulation Authority (PRA), said the proposals are intended to remove unintended consequences in existing leverage rules and improve the usability of capital buffers, enabling banks to better support lending during periods of stress.

Among the proposals, the FPC wants to move towards a single releasable buffer framework to reduce complexity and ensure a "more consistent and coherent approach to buffer design" across the banking system.

It also plans reforms to the leverage ratio framework, including removing the countercyclical leverage buffer, aligning the additional leverage ratio buffer with international standards, reducing the minimum leverage ratio requirement to 3% from 3.25%, and introducing a releasable general leverage ratio buffer of 25 basis points.

According to the FPC, the proposed package would reduce the leverage ratio maintained by large UK banks by around 20 basis points in aggregate, although the impact would vary by institution. The Bank said it will work with the PRA to assess whether the proposals leave any financial stability gaps before consulting on the reforms.

In a report, the central bank said: "The Committee is announcing a package of proposed changes that will help ensure the framework is simpler, more effective, more proportionate and better calibrated to the risks in today's financial system, while also ensuring that the UK banking system remains resilient and able to support the economy when it needs it most."

A further update on capital requirements linked to domestic exposures will be provided in its fourth-quarter 2026 Financial Stability Report, the Bank said.