Bank of England set to ‘water down’ rules for lenders
Summary
The Bank of England is set to ‘water down’ changes to its post-crisis rulebook, after lenders are said to have warned that the new plans would harm the economy.
Regulators are examining ways of lowering the burden on banks after the UK adopts new international capital rules from 2025.
In November, the PRA published a consultation which suggested that British lenders will be forced to hold back billions of pounds more than their EU rivals. While the PRA is still insisting on robust implementation, regulators are said to be seeking a ‘middle ground’ on small business lending that would involve a transition period from the current framework.
The Telegraph reports that the PRA is also considering ‘grandfathering’ existing loan arrangements, and adopting a common-sense approach to risks which high street banks argue will tie-up less money on balance sheets which they can then use to boost the economy.
The news comes ahead of full implementation of the Basel 3.1 reforms, which go live at the start of 2025. These international regulatory accords aim to mitigate risk within the international financial banking sector by outlining the amount of capital banks are required to hold against the risks they take.