British banks are capable of continuing to lend to households and businesses even in a recession worse than the financial crisis, the Bank of England (BoE) said on Monday. A majority of the banks in the United Kingdom secured Tier 1 capital ratios, just under 14% of risk-weighted assets.
According to the report, banks maintained their capital ratios due to their ability to cut dividend payments, employee variable remuneration, and coupon payments. In order to allow major British lenders to absorb up to £23 billion pounds of losses and provide up to £500 billion pounds of loans, the BoE decided to implement the counter-cyclical capital buffer.
"By shifting the balance of capital requirements from minimum requirements that need to be held at all times toward buffers that can be drawn down as needed, these changes will mean banks will be more able to absorb losses while maintaining lending to the real economy through the cycle," the BoE said in a statement.
