The Bank of England is reviewing its leverage rules, which could lead to a boost in Britain’s government bond market and lower public borrowing costs. Banks, including Barclays, have called on the BoE to stop counting holdings of British government bonds towards a leverage ratio, which requires banks to have capital worth over 3.25% of their assets.
Proposed Change
A change in the rules could encourage British banks to hold up to £150 billion more government bonds, lower average yields by a fifth of a percentage point, and save the government £2.5 billion a year in debt interest. However, some former regulators have warned that exempting government bonds from leverage rules would increase financial risks.
The BoE is due to give an update on its plans in its half-yearly Financial Stability Report. The central bank’s review into leverage rules and other buffers follows a relaxation of U.S. leverage requirements in November, which increased competitive pressures for British lenders.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
