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Bank of England acts to boost bank lending

Staff Writer | July 5, 2016
The Bank of England (BOE) has loosened UK bank's requirements to hold extra capital and warned that risks from the country's Brexit vote had already started to "crystallise".
Brexit   The cuts to capital buffers
In its twice-yearly Financial Stability Report, the Bank looked to encourage banks to keep lending by trimming the countercyclical capital buffer rate to 0% from 0.5% with immediate effect and until at least June 2017.

The Bank said the cuts to capital buffers will raise banks' capacity for lending to UK households and businesses by up to £150bn.

The BoE, which in March had said the capital buffer would rise to 0.5%, said it expected banks not to increase dividends and other payments, such as bonuses, as a result of the reduced capital buffer.

Led by Governor Mark Carney, the Bank's Financial Policy Committee (FPC) monitored a range of risks, including the UK's large current account deficit, swollen commercial property market, high levels of household debt and subdued and fragile global economies and markets.

"There is evidence that some risks have begun to crystallise," the report said. "The current outlook for UK financial stability is challenging."

The Bank also said it stood "ready to take actions that will ensure that capital and liquidity buffers can be drawn on as needed, to support the supply of credit and in support of market functioning".