UK Banks Financial Stability Report Preview

Research evidence excerpt

UK Banks Financial Stability Report Preview

Accessible version

UK Banks

Financial Stability Report Preview

Government Regulations

Overall: A staging post on capital requirements 01 July 2026

On 7 July the BoE will publish the record of the 26 June FPC meeting and the July 2026 Equity

FSR. The FPC had committed to providing an update on its review of bank capital United Kingdom

requirements at the event on (1) buffer usability, (2) the implementation of the leverage Banks-Multinational/Universal

ratio in the UK, and (3) interactions, proportionality, and complexity of domestic

requirements. We expect the event to be a staging post, whereby the FPC may provide a Table of Contents

sense of direction/ propose consultations. It is also worth noting that Katharine Braddick 7 July FSR: a staging post on capital

will begin her role as the next Deputy Governor for Prudential Regulation at the BoE and 2 requirements

Chief Executive of the PRA on 1 July. The 7 July FSR may still give an early steer on the

Leverage: not a constraint, but an opportunity

direction of travel under Braddick. 2

cost

Banks: Leverage main area of interest Opportunities to deploy more in Gilts 3

For banks, leverage is an area of interest. While the large banks are not leverage A regulation tweak to help bolster the T-bill 5

constrained (i.e. CET1 is the binding constraint), it does nevertheless have an market

opportunity cost, e.g. in the form of AT1 costs. Even for those with more leverage

headroom, this still matters when management make decisions around resource Equity Research

allocation and growth. This includes decisions around using Gilts to manage liquidity and Perlie Mong >>

Research Analyst

interest rate risks – more flexibility in leverage should in theory allow banks to take MLI (UK)