Is the Bank of England putting us at risk of a bank bailout again? This senior bank chief thinks so

The chair of the Independent Commission on Banking thinks the central bank’s safety measures haven’t gone far enough

The Bank of England (BoE) has denied it has gone soft on British banks following the financial crisis.

In an article in the FT on Sunday, the chair of the Independent Commission on Banking (ICB), Sir John Vickers, criticised the BoE for ignoring its proposals which called for banks to have a 3% buffer to stop a taxpayer bailout in the event of another financial crash.

The BoE had instead decided to require banks to have a 0.5% buffer – a level Sir John claimed is not enough.

“The BoE is proposing substantially milder equity requirements for British banks than did the ICB. The wisdom of this policy is questionable,” he wrote.

However, the BoE rebuffed Sir John’s assertion, releasing a statement which said it had gone further than the ICB suggested, taking into consideration hybrid bonds that convert into equity in a crisis.

“The Bank of England continues to support the conclusions of the ICB but is proposing a higher level of capital and overall resilience in the banking system than was proposed by the ICB in their final report,” the BoE said.

It added: “On a comparable basis, globally systemic banks in the UK will be required to have 10 times more capital than before the crisis.”

 

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