The Bank of England has reduced the core capital requirement for major UK lenders from fourteen per cent to thirteen per cent, marking the first easing of post crisis standards in more than a decade. The shift follows robust stress test results that showed the banking sector could withstand severe economic shocks while maintaining adequate resilience. Officials believe the adjustment will free capacity for banks to extend more credit to households and businesses at a time when the government is seeking stronger economic momentum.
The change is part of a broader review of how capital buffers are used, with regulators examining whether existing frameworks have become overly restrictive during periods of moderate risk. By lowering the threshold, the central bank aims to ensure capital is not trapped on balance sheets but can instead support lending, investment and productive activity across the economy. The move may also prompt further discussion on the leverage ratio and the usability of other regulatory buffers, signalling a more growth oriented stance after years of caution.
Bank executives have been urged to channel the additional flexibility into real economy lending rather than returning funds to shareholders. Analysts note that the impact will depend on banks’ appetite to expand loan books in an environment still shaped by cautious consumer behaviour and uneven business investment. However, the easing could support credit growth in areas such as mortgages, corporate finance and infrastructure projects if demand improves.
For the wider financial sector, the decision represents a significant shift in regulatory posture, suggesting confidence in the resilience of UK banks and a willingness to recalibrate rules to encourage economic activity. The coming months will reveal whether lenders respond by increasing access to credit or continue to prioritise balance sheet strength and shareholder distributions.
