The prudent regulator has initiated a consultation to raise the threshold for retail deposit rates that banks must hold to £70 billion, starting from £50 billion.
The leverage ratio is designed to simply indicate the amount of capital the company must fund mortgages, credit cards and other loans.
The Bank of England currently requires companies with over £50 billion in retail deposits or £10 billion in non-UK assets to meet the minimum leverage ratio requirement of 3.25% plus buffer.
These thresholds came into effect in 2016 and 2023, respectively, and have been established to ensure the financial stability of major UK banks, construction societies and investment companies.
This measure will benefit smaller lenders, provide them with more growth, and then have to comply with stricter requirements.
The proposals came after the Prime Minister called on regulators to cut off the traditional Chinese tape festival in the city. Rachel Reeves said last year that the rules were implemented after the 2008 financial crisis was “too much.”
The Prudential Regulatory Authority said its proposal “reflects nominal GDP growth since 2016.”
It added: “This growth will ensure that the threshold continues to occupy major UK companies, while smaller companies below the new threshold will have more room for growth before being bound by the leverage ratio requirements.”
Sam Woods, CEO of the Prudential Regulatory Authority and Deputy Governor of the Bank of England, said: “Preventing excessive leverage in our banking system is crucial to economic stability, but we should achieve this in proportion.
“Today’s recommendation will support growth and innovation by providing more room for growth for smaller banks before entering the leverage system.”
The agency did not propose a change to the £10 billion Non-UK asset threshold, which it said “has recently implemented a larger threshold than the retail deposit and continues to operate as expected”.
