Bank of England divided on how soon to make banks boost capital

Splits are opening in Threadneedle Street over how soon to force banks to build up extra capital against a future crisis, it has emerged.

The minutes of the latest Bank of England financial policy committee meeting, chaired by Governor Mark Carney and charged with steering the UK’s financial stability, showed its 10 members divided over the best course of action.

Some members thought it was “too soon to consider an increase in capital buffers on UK exposures” despite rising credit growth, citing risk-averse businesses and tighter market conditions.

But other members argued “there could be a case for such an overall increase soon” as banks needed to build up a “meaningful buffer of additional capital that could then be released” if conditions deteriorated in future.

Carney last week said the FPC would eventually set the so-called “countercyclical capital buffer” in the region of 1%, although this would not involve UK banks raising any extra capital.

The FPC is supposed to make decisions through consensus, but the minutes said it could hold a vote if no agreement is reached.