Carney set to relax bank capital rules to boost lending

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The Bank of England is expected to loosen the reins on banks in a bid to encourage them to continue to lend following the UK’s vote to leave the EU.

The Sunday Times reports Bank of England governor Mark Carney could loosen requirements on the amount of capital banks have to hold as part of the Bank’s financial stability report, to be released tomorrow.

One banking source told the newspaper: “Carney may tell us that we can take a break from raising as much capital. If he does, this would be the clearest sign that we are heading for a recession.”

At the same time, following the Brexit vote, the central bank is also scrutinising lenders more carefully, with more frequent checks on cash positions.

Another source says: “The Bank of England is making daily calls asking for information about how exposed investors are. It wants to make sure if there are big dips in the market, investors have the means to handle potential losses. This is extremely proactive on the regulator’s part.”

Last week Carney said the Bank would take “whatever action is needed to support growth” following the Brexit vote, and hinted at the possibility of interest rate cuts or further quantitative easing.

Separately, Chancellor George Osborne abandoned his target of creating a UK budget surplus by 2020. He has also pledged to cut corporation tax from 20 per cent to below 15 per cent to encourage investment in the UK.