{"id":7994,"date":"2026-04-07T08:02:09","date_gmt":"2026-04-07T08:02:09","guid":{"rendered":"https:\/\/www.europesays.com\/britain\/7994\/"},"modified":"2026-04-07T08:02:09","modified_gmt":"2026-04-07T08:02:09","slug":"lenders-call-for-overhaul-of-banking-regulation","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/britain\/7994\/","title":{"rendered":"Lenders call for overhaul of banking regulation"},"content":{"rendered":"

Some of the UK\u2019s leading lenders have expressed their frustrations with UK banking regulation in a new report from the Association for Financial Markets in Europe (AFME).\u00a0<\/p>\n

AFME\u00a0welcomes\u00a0the FPC\u2019s move to lower its benchmark for Tier 1 capital requirements, which reflects both the\u00a0effectiveness\u00a0of postcrisis reforms and improvements in risk measurement. However,\u00a0AFME cautions that a reduction in the benchmark alone will not be sufficient to deliver meaningful change in practice.<\/p>\n

Under the existing framework, banks have limited scope to reduce their capital levels closer to the FPC\u2019s benchmark due to binding constraints across the capital stack, including\u00a0minimum\u00a0requirements\u00a0and\u00a0buffers. As a result, AFME argues that structural changes to the framework are\u00a0required\u00a0if the benchmark is to be achievable in practice, reducing capital requirements in\u00a0a way that is sufficiently meaningful\u00a0to\u00a0have a significant firm-level impact across business models.\u00a0This is crucial because\u00a0a narrow reform, underestimating areas\u00a0of\u00a0overcapitalisation\u00a0for some business models, could introduce competitive distortions\u00a0between firms undertaking similar economic activities.<\/p>\n

AFME\u00a0emphasises\u00a0that there is already significant flexibility for the FPC and Prudential Regulation Authority (PRA) to act within the existing international framework. While supporting international engagement to review global standards, AFME encourages UK authorities not to delay reforms pending changes to Basel standards.<\/p>\n

The submission sets out a range of recommendations aimed at reducing excessive structural conservatism while\u00a0maintaining\u00a0resilience. These include reforms to risk-weighted and leverage-based requirements, addressing overlaps in the treatment of domestic exposures, and simplifying the capital buffer framework to improve usability.<\/p>\n

AFME highlights that a more proportionate and better-calibrated regime would enable banks to intermediate more efficiently across wholesale and capital markets, supporting lending,\u00a0underwriting\u00a0and market-making activity. In turn, this would help deepen market liquidity, reduce the cost of raising capital for UK companies, and strengthen the UK\u2019s position as a conduit for global investment flows.<\/p>\n

AFME and its members stand ready to support ongoing engagement with the FPC and the PRA as the review progresses.<\/p>\n

Caroline Liesegang, Managing Director \u2013\u00a0Capital\u00a0&\u00a0Risk\u00a0Management\u00a0at AFME, said:\u00a0\u201cThe FPC\u2019s review is a crucial opportunity to\u00a0modernise\u00a0and future-proof the\u00a0UK\u2019s capital framework so it remains robust while better enabling banks to provide the lending, underwriting and\u00a0market making\u00a0activities\u00a0that support households, businesses and the wider economy. Incremental changes will not be sufficient. Meaningful,\u00a0well\u00a0calibrated\u00a0reforms are needed to ensure capital requirements align with risk, reduce unnecessary conservatism, and\u00a0maintain\u00a0the UK\u2019s global competitiveness.\u201d\u00a0<\/p>\n

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