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The Markets
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The Markets
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Financial Services

Bank of England eases bail-out protection rules for mid-sized banks

Shares in challenger banks such as Metro Bank Holdings PLC (LSE:MTRO) were little moved on Tuesday after the Bank of England pushed back the implementation of new, global 'Basel 3.1' rules on banks' trading activities by one year to 2028.

The delay comes as it waits to see what the US and other major economies will do.

The central bank announced a package of measures that it said were "designed to maintain stability in the financial sector while offering new growth opportunities for mid-sized banks and building societies".

This included an easing of requirements for mid-sized banks to hold sufficient capital to ensure they can absorb losses and be recapitalised rather than require taxpayer-funded bailouts.

The asset thresholds that determine whether a firm must meet the minimum requirement for own funds and eligible liabilities (MREL) are being raised to £25-40 billion, from the previous threshold of £15-25 billion.

"This will provide greater clarity and flexibility on whether a firm will need a transfer or bail-in strategy, with the former no longer needing to hold MREL above minimum capital requirements."

That move had been expected, according to Reuters, although some lenders were hoping for a more generous tweak from the BoE.

Dave Ramsden, deputy governor, said the changes came after the BoE "considered and reflected industry feedback".

"These changes are designed to foster growth and competition, recognising that smaller firms present lower risks to financial stability, whilst also maintaining size-appropriate resolvability capabilities.

"This will ensure a proportionate UK resolution regime that is fit for purpose and ready to be used if required to resolve firms in a way that protects depositors and public funds."

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