BOE cut the capital buffer for UK banks to zero from 0.5% - BBH

Research Team at BBH, notes that the BOE cut the capital buffer for UK banks to zero from 0.5% of risk-weighted assets. 

Key Quotes

“The move is said to raise potential lending by GBP150 bln, and was widely expected after Governor Carney said that easing was likely over the summer.  The next BOE policy meeting is July 14, and outright easing then seems likely as the BOE continues to act quickly and aggressively. 

The BOE's Financial Stability Report provided more color on its response to Brexit.  It noted that “some risks have begun to crystallize” and added that the “current outlook for financial stability is challenging.”  The committee said it is monitoring closely five key risks:  1) investor appetite for UK assets, 2) valuations in the commercial real estate market, 3) vulnerability of indebted households and landlords, 4) the global economic outlook, and 5) liquidity in the financial markets.

The UK reported services and composite PMI for June at 52.3 and 52.4 vs. 52.8 and 52.0 expected, respectively.  It is difficult to determine the impact of the uncertainty ahead of the referendum.  The economy was already gradually slowing.  Carney had warned of significant downside risks in case of Brexit, and he maintained his sobering assessment last week.”