Bank of England weighs easing a key capital requirement for major banks to boost lending capacity

The Bank of England announced on Tuesday that it is considering revising a key capital requirement for major UK banks, a move aimed at encouraging greater lending to the real economy. The proposal relates to a capital rule that constrains how much banks can lend relative to their balance sheet size; easing it would give large lenders more headroom to extend credit without raising additional equity capital. The announcement follows a period of sustained pressure from UK lenders and the Treasury arguing that certain post-2008 capital rules, designed to prevent excessive leverage (borrowing relative to capital), have become a structural brake on credit availability. Separately, the Bank of England has been monitoring leveraged lending conditions and the interaction between capital rules and the broader private credit market. No specific numerical threshold, timetable for consultation, or named institutions were disclosed in the available snippet. The initiative sits within a wider government and regulatory drive to make UK financial markets more competitive following the post-Brexit recalibration of financial services regulation. Any formal revision would require a public consultation period and coordination with the Prudential Regulation Authority (the PRA, the Bank of England's subsidiary responsible for prudential supervision of banks and insurers).