Bank of England regulator urges UK banks to release excess capital for growth

David Bailey, executive director of Prudential Policy at the Bank of England, warned that UK banks maintain far larger "rainy-day" and discretionary capital cushions than required. He said the regulator has begun talks with international counterparts to streamline the capital framework and unlock billions of pounds of idle cash. In July, the Financial Policy Committee outlined a shift toward a single, stress-releasable buffer, moving away from the existing tiered system of legal minima, firm-specific buffers and leverage caps.

Bailey noted that banks voluntarily add "management buffers" to avoid breaching requirements, resulting in excess capital that could be redirected to support customers and spur growth. The PRA is seeking to provide clearer rules so banks feel confident releasing this capital. Bailey, who is slated to leave the Bank at the end of October, dismissed industry criticism that the regime is overly stringent, emphasizing the need for a balance between resilience and economic activity.