The Bank of England plans to increase capital requirements for United Kingdom lenders by £11.4 billon (S$20.1 billion) to tackle risks posed by consumer credit growth and prepare for the uncertain outcome of Brexit talks.
Each increase of 0.5 percent will swell banks' cushion of common equity Tier 1, the highest-quality capital, by 5.7 billion pounds, according to the BOE's Financial Stability Report.
Bringing forward the assessment of stressed losses on consumer credit lending in the Bank's 2017 annual stress-test: This will inform the FPC's assessment at its next meeting of any additional resilience required in aggregate against this lending.
The BOE on Tuesday ordered banks to begin rebuilding special buffers of capital that in July it said they could run down with the aim of keeping credit flowing to households and businesses in the wake of the referendum result.
In August 2016, the Bank of England cut its key interest rate by 25 basis points for the first time in seven years.
Referring specifically to speculation about a crash sparked by vehicle finance, Carney said that if used auto prices fell by 30pc this could knock just 0.1 percentage points off the capital ratios of banks, however.
"The current environment is also likely to have improved the credit scores of borrowers", it said.
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After the United Kingdom made a decision to leave the European Union a year ago, the FPC cut to zero the requirement that banks create an extra capital buffer.
While consumer credit is a much greater concern than mortgage borrowing, the Bank has also enforced rules created to control the mortgage market.
But Britain's economy has performed more strongly than expected since the vote, despite some more recent signs of a slowdown.
These told banks to limit lending at above 4.5 per cent of a borrower's income, and to make sure customers could afford their loans if the base rate rose by 3 per cent. And I want to see how that plays out....
This sees it scrap an emergency policy brought in past year after the Brexit vote, when the buffer rate was slashed to zero, allowing banks to release reserves to help ward off the threat of recession. The chief economist of the Britain's central bank has said on Wednesday that he would soon be in a position to support a rate rise. It's a decade since the BoE's Monetary Policy Committee last increased official borrowing costs.
That became even more clear on Wednesday when Jon Cunliffe, who sits on the MPC as deputy governor for financial stability, made clear that he does not support a rate hike anytime soon, citing concerns about slowing consumer spending, which he believes now trumps the surging inflation caused by the pound's slump since the referendum - which has itself been a driver of slowing spending. "In that regard, we don't need monetary policy to do our job".