Banks expect to hike capital again in the coming months

Tim Wallace
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SUSTAINED regulatory pressures mean banks are going to have to allocate even more resources to boosting their capital levels in the second quarter, the Bank of England reported yesterday.

A net balance of 1.2 per cent of lenders reported falling capital levels in the past three months, while a balance of 19.9 per cent expect to hike capital in the coming quarter.

The recent fall was down to poorer profit figures and large regulatory and compensation provisions, the Bank said.

As their position improves, continued regulatory demands will push capital levels back up.

“Regulatory drivers, such as the move to a slotting approach for commercial real estate lending and the ongoing transition to Basel III, had acted in the opposite direction, pushing up lenders’ demand for capital,” it said.

The report also showed banks expect a rise in customer deposits despite the record low rates paid on accounts, as households still favour low-risk, instant access savings products rather than locking their money away for longer or taking more risk.