BOE Sets New Capital Standards for Biggest U.K. Banks

LONDON--Britain's biggest banks will be subject to tougher new capital requirements from 2019 under plans announced on Friday by the Bank of England.

The central bank's Financial Policy Committee said it proposes the U.K.'s biggest lenders will be required to meet higher leverage ratios to ensure they can weather unexpected losses and to shield taxpayers from bailing out stricken firms in a crisis.

British banks are currently subject to a leverage ratio of 3%. By 2019, the BOE said it proposes to raise this to up to 4.05% for the biggest lenders. The precise level of individual banks' leverage ratios will depend on whether they are classified as critical to the global financial system and how big their domestic U.K. operations are, the BOE said.

Big banks' leverage ratios could rise further still, to a maximum of 4.95%, if the BOE imposes an additional systemwide capital buffer that it can deploy to rein in excessive lending, according to the central bank's proposals. British lawmakers will now scrutinize the BOE's proposals.

Britain's biggest banks include Royal Bank of Scotland Group PLC, Barclays PLC, Lloyds Banking Group PLC, HSBC PLC and the U.K. unit of Banco Santander SA. Most banks' leverage ratios will be at or near 4.05% from next year, according to estimates from Credit Suisse.

A leverage ratio places an overall limit on the size of a bank's balance sheet relative to its equity, or capital. Banks are also subject to capital requirements set globally and nationally that determine how much capital they need based on the riskiness of their assets.

Other nations have also set minimum leverage ratios to bolster the resilience of their financial system. In the U.S., the biggest banks will from 2018 be subject to a minimum leverage ratio of 5%.

Write to Jason Douglas at [e-mail] and Max Colchester at [e-mail]

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