Shearman & Sterling LLP | FinReg | UK's Financial Policy Committee Responds to Brexit Vote by Eliminating the Countercyclical Buffer for Bank Capital
Financial Regulatory Developments Focus
This links to the home page
Financial Regulatory Developments Focus
FILTERS
  • UK's Financial Policy Committee Responds to Brexit Vote by Eliminating the Countercyclical Buffer for Bank Capital

    07/05/2016

    The Bank of England published its latest Financial Stability Report in which the Bank's Financial Policy Committee sets out the key risks to the UK's financial system and weighs them against the resilience of the system. In March 2016, the FPC had identified areas through which there could be increased risk to the UK's financial stability as a result of the vote by the UK public to leave the EU. Such areas include financing of the UK's large current account deficit, the commercial real estate market, the high level of household indebtedness, limited growth in the global economy and vulnerabilities in the functioning of the financial markets. The FPC states that there is evidence that some of these risks have begun to crystallize and that the current outlook for financial stability is challenging. The FPC is monitoring closely the risks of, amongst other things, further deterioration in investor appetite for UK assets, adjustments in commercial real estate markets tightening credit conditions and reduced and fragile liquidity in core financial markets.

    To support the supply of credit and in support of market functioning, the FPC has reduced the UK countercyclical capital buffer rate from 0.5% to 0% of banks' UK exposures with immediate effect. This rate is expected to remain in effect until June 2017, and will reduce regulatory capital buffers by £5.7 billion. The FPC continues to monitor the risks closely.

    View the report.

    You may like to view our client publications and webinar materials on the impact of Brexit, available here.