2017.06.2708:13:00UTC+00UK Set To Raise Lenders' Capital Requirement

The Bank of England plans to raise capital requirement of lenders amid consumer credit growth.

The Financial Policy Committee would lift the countercyclical capital buffer to 0.5 percent from zero percent, with effect from June 2018.

In the absence of any material change in the outlook, the bank expects to lift the rate again to 1 percent at its November 2018 meeting, the bank said in its Financial Stability Report. An increase of 0.5 percent itself lift the capital requirement by GBP 5.7 billion.

The BoE had reversed a planned hike in capital buffer last year after Britons voted to leave the EU.

The FPC now assessed that most financial stability indicators are neither particularly elevated nor subdued. Capital buffers are necessary to allow banks to support the real economy in a downturn.

The bank will have full set of stress test of major banks when it consider raising the buffer next year.

The decision to raise capital buffers reflects its assessment of the current risk environment and its intention to vary the buffer in gradual step.

Further, the bank intends to set the minimum leverage requirement at 3.25 percent of exposures from 3 percent.