New bank capital rules due by 2025 at latest, says BoE’s Woods

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Britain's Deputy Governor for Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority Sam Woods speaks during the Bank of England's financial stability report at the Bank of England in the City of London

By Huw Jones

LONDON – The final batch of post-financial crisis bank capital rules will be introduced in Britain before or at the same time as in the European Union, Bank of England Deputy Governor Sam Woods said on Tuesday.

Brussels has proposed introducing the final rules in 2025, two years later than agreed by the global Basel Committee, which set tougher capital standards after lenders were bailed out by taxpayers over a decade ago.

Basel has already delayed their introduction by a year to January 2023 to give banks time to move on from the COVID-19 pandemic.

Woods told a Financial Times event that the BoE won’t set out its proposals for implementing the final rules until the second half of next year, making Basel’s January 2023 deadline impossible to meet.

“I would be extremely disappointed if we would be behind the EU timing in our implementation, and I do not expect that,” Woods said.

“The only question is whether we are ahead or whether we are at the same time.”

Banks that used London as their European base are facing pressure from the European Central Bank to move more staff and activities to their new Brexit hubs in the EU.

Several branches of EU banks are based in London but Woods said he was not in any “tit-for-tat game”, though reducing UK-based banks to empty shells would be “totally unacceptable”.

“We do need to keep an eye on it going forward,” Woods said.

He softened his opposition to having a formal remit to maintain the competitiveness of a post-Brexit London as a global financial centre when setting financial rules.

The British government has proposed adding growth and competitiveness as a secondary objective for BoE rulemaking to its main remit of keeping banks and insurers safe.

“What the government has put forward … I actually think is quite sensible. I think that will be fine,” Woods said. “People should not expect us to lower standards after Brexit. We have absolutely no intention of doing that.”

Banks in Britain hold enough capital to withstand outcomes much worse than the BoE expects, with a repeat on last year’s curbs on bank dividends at the height of the pandemic unlikely, Woods said.

(Reporting by Huw Jones; Editing by Paul Simao)