Bank of England eases crisis rule for small lenders By Reuters


© Reuters. FILE PHOTO: A general view shows the Bank of England in the City of London financial district in London, Britain November 5, 2020. REUTERS / John Sibley // File Photo

By Huw Jones

LONDON (Reuters) – Small banks will have time to meet their debt issuance targets to bolster their crisis defenses, the Bank of England said on Thursday as it seeks to boost competition in an industry banking long dominated by a handful of lenders.

Banks are required to issue MRELs, or minimum capital requirement and qualifying liabilities, which is a form of debt that can be written off to absorb losses and avoid a repeat of the £ 137 billion taxpayer bailout ($ 188.3 billion) from lenders in Britain during the financial crisis more than a decade ago.

The targets were set under European Union rules, which Britain can now change after leaving the bloc last December.

“Facilitating business growth towards MREL directly addresses business concerns about the barriers to growth created by increasing MREL requirements as businesses expand their balance sheets,” said the Bank’s Deputy Governor. England, Dave Ramsden, in a statement.

The central bank has authorized 27 new banks since 2013, but Lloyds (LON :), Barclays (LON :), HSBC and NatWest continue to dominate retail lending, and so-called “challenger” banks have said tight thresholds for issuance of MRELs prevent them from gaining market share.

The BoE has proposed replacing its indicative threshold of £ 15 billion to £ 25 billion with a notice period indicating when a lender can transition to its MREL targets, if the company exceeds £ 15 billion in total assets.

“The proposals for an extended transition path are proportionate in implementation and respond directly to comments from stakeholders arguing for a ‘smoother climb’,” Ramsden said.

“They are inherently flexible and nimble as they allow for further expansion should unforeseen circumstances require it. And they improve the transparency of the scheme by being clearer when MREL requirements can begin to apply to individual companies.”

($ 1 = 0.7274 pounds)

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