Bank of England may raise countercyclical buffer

Author: Edward Price | Published: 13 Oct 2015

The Bank of England may raise its countercyclical capital buffer (CCB), forcing institutions to set aside more reserve funds as the economy improves.

And while many in the industry think the buffer is important, the British Bankers’ Association (BBA) believe the safeguard should be used appropriately.

The context is rising credit growth in the UK, according to the minutes of the Bank of England Financial Policy Committee’s (FPC) September meeting. This concerns the FPC: the expansion is seen as an indicator of increased domestic risks. Policy makers have held the CCB at zero every quarter since its introduction in 2013.

But reservations remain. "To be effective [the CCB] will need to be used in a way which is truly counter-cyclical and which is predictable and transparent for industry and investors," said a spokesperson for the BBA.

"It is noteworthy that to date the vast majority of macro-prudential measures introduced...