The Bank of England is set to demand banks to set aside capital as buffer as soon as in March, in order to absorb losses in case of stress and support the real economy.
In the semi-annual Financial Stability Report, the Financial Policy Committee said Tuesday it intends to make active use of the time-varying countercyclical capital buffer.
By moving early, the FPC expects to be able to vary the countercyclical capital buffer more gradually.
The FPC expects the countercyclical capital buffer to be in the region of 1 percent of risk-weighted assets. Currently, the buffer rate is at zero percent.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he doubts that this will do much to subdue credit growth, since banks already hold more capital than they need.
Banks actions to raise significantly more capital over recent years mean that a gradual recovery in lending remains in prospect, providing only modest support to the economic recovery at a time when fiscal squeeze and strong pound will be depressing growth, he added.
Further, the banking system would require Tier 1 equity of around 13.5 percent of risk-weighted assets before 2019, the BoE said.
The central bank also released the results of the 2015 stress test. The report showed that all 7 major banks passed the test.
The FPC noted that that no macroprudential actions on bank capital were required in response to the 2015 stress test.
The test did not reveal capital inadequacies for five out of the seven banks. Those five banks were Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Santander UK.
However, Royal Bank of Scotland Group did not meet its individual capital guidance after management actions. Standard Chartered, which has heavy exposure to the emerging markets, was found to miss its tier 1 capital ratio target of 6 percent.
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