Overview
- Policymakers cut the aggregate Common Equity Tier 1 benchmark from 14% to 13%, the first easing of post‑crisis buffers since they were introduced.
- The Financial Policy Committee said risks to stability have increased in 2025, highlighting stretched AI‑related equity valuations, geopolitical tensions, sovereign debt strains and cyber threats.
- The seven largest UK lenders passed the latest stress tests, with scenarios including a 5% GDP contraction, a 28% house‑price drop and Bank Rate at 8%, and were judged able to keep lending.
- The decision follows pressure to support growth, with Chancellor Rachel Reeves urging a review of capital rules and UK Finance arguing banks hold large excess capital potentially worth tens of billions of pounds.
- Analysts noted most banks already operate above minimum buffers so any pickup in lending or shareholder payouts may be gradual, and Governor Andrew Bailey said the Bank will not dictate how freed capital is used.