The Bank of England’s chief economist Andy Haldane wants a discussion on whether financial institutions may need to set aside more capital to help them weather any potential losses. Reuters reported that in a question and answer session on Twitter, designed to promote an upcoming BoE event in November, Haldane engaged in lively discussions around BoE policy, market liquidity and of course, tighter capital requirements.
Haldane said: “[Capital requirements] will be 10x higher than pre-crisis. Should they be higher still? Right question for tomorrow. We need that debate.”
Britain has, however, made an effort to improve its capital and protect against future banking missteps that can lead to another financial meltdown, according to the BoE. Last year, the BoE released stress test results, which indicated that three of the eight major U.K. banks and building societies reviewed by regulators need to bolster their capital positions. The report revealed, however that the overall banking system’s resiliency has improved.
The Prudential Regulation Authority (PRA) Board found capital issues with three of the firms—Co-operative Bank, Lloyds Banking Group, and Royal Bank of Scotland. The board said that the three banks at needed to strengthen further their capital positions. Moreover, the BoE may call for banks to hold even more capital if the stress tests reveal poor risk management practices.
During the twitter chat, Haldane added that reduced market liquidity was a result of the shifting market and not necessarily tougher regulations. He also said that the regulator is willing to discuss if they have taken it too far at the event in November.
Haldane declined to answer questions about BoE’s rate moves or if China’s economic slowdown will affect the British economy. Reuters said that the BoE has been active on social media since two years ago when Haldane’s predecessor, Spencer Dale took to Twitter to discuss the future of monetary policy.
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