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British banks set to face new capital buffer rules

British banks may face tighter controls with regard to their capital buffers in the near future, it has emerged.

Proposals put forward this morning (19 September) by the Treasury include granting the Bank of England (BoE) the remit to force financiers to increase their provisions against bad debts, the Daily Telegraph reports.

Government officials have begun their consultation on the new range of powers to be handed to the BoE in the coming months and years, which will transform the body into one of the world's most powerful central institutions.

Specifically, this buffer policy would involve the BoE being able to instruct banks to stockpile capital at times when their business is faring well in order to provide themselves with a cushion when they struggle.

This comes after BoE Financial Policy Committee member Paul Fisher wrote in an article for City AM that the need to build up capital reserves must not affect well-judged lending.

By Asim Shah