The Bank of England has proposed that Britain’s biggest banks should set aside more capital from 2019 than planned, under rules being drawn up to prevent a repeat of the financial crisis.
Launching a public consultation on a new leverage ratio, the Bank said many financial institutions may have to comply with a requirement to set aside funds on top of a proposed global minimum of three per cent of their capital. A leverage ratio of three per cent means a bank must hold capital equivalent to three per cent of its total assets, regardless of how risky they are.
Many politicians want a leverage ratio of four per cent or above, saying tougher measures are needed to ensure taxpayers are not asked to bail out banks again.
Bank Governor Mark Carney has previously said that three per cent might not be high enough, but the consultation paper did not propose any specific figures for what the leverage ratio, including any supplements, should be.
Britain’s banks are in the process of paying out £1.2bn to compensate small businesses that were mis-sold complex interest rate hedging products, data from the UK financial watchdog showed. The figure represents about a third of the £3.75bn set aside by Britain’s four biggest banks – Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland – to deal with the issue. The Financial Conduct Authority (FCA) in May ordered banks to review almost 30,000 cases for possible mis-selling after finding “serious failings” in the way the products – known as swaps – were sold.