Lenders face tougher stress tests
The Bank said it will adjust stress test levels every year depending on the financial cycle.
The move could result in lenders upping the required core capital buffer from 4.5% this year to around 6% next year.
British units of foreign investment banks and smaller lenders will escape these new stress tests, which will only impact lenders with more than £50bn of retail deposits.
Mark Carney, governor of the Bank of England, said: “The United Kingdom needs banks that can weather shocks without cutting lending to the real economy.”
“The Bank of England is taking steps to ensure we can assess a range of future risks from a number of different sources to inform our micro- and macro-prudential policy decisions. Our approach embodies a comprehensive and detailed approach, a desire to deepen and strengthen our analysis, and the flexibility to respond to changing risks.”
The British Chambers of Commerce said: “The Bank’s decision to link stress testing expressly to the needs of the real economy will reassure business.”