People walk near the Bank of England building in London, Britain, December 1, 2025. REUTERS/Maja Smiejkowska

By Lawrence White and Phoebe Seers

LONDON, Dec 2 - Britain's central bank on Tuesday eased the capital requirements for lenders by 1 percentage point to 13%, reducing the amount they need to hold in reserve against adversity in a boon to banks already riding high from record recent profits.

The Bank of England said its capital framework review showed that the benchmark for Tier 1 capital requirements for lenders, set at 14% since 2015, could be reduced.

The BoE said its change reflected an updated assessment of the benefits of capital, helping banks withstand crises, against the drawback of higher capital costs weighing on growth.

The new level of 13% comprises an underlying optimal level of 11%, plus 2 percentage points to account for outstanding gaps and shortcomings in measurement of risk-weighted assets, the BoE said.

British bank executives in recent weeks had sounded optimistic about the potential for such a change, especially after BoE deputy governor Sarah Breeden earlier this year said the central bank was considering how to free up banks' use of their capital.

The BoE's Financial Policy Committee (FPC) has been reviewing potential changes to the capital structure since July, amid a broader push by Britain's Labour government for regulators to prioritise economic growth as well as financial stability.

"Given the reduction in the FPC’s benchmark, banks should have greater certainty and confidence in using their capital resources to lend to UK households and businesses," the BoE said in its report.

In the United States, the Trump administration is expected to ease capital rules for the biggest banks, while the European Union is working on plans to simplify its prudential framework. Industry body UK Finance has warned that without similar moves, British banks could lose market share to global rivals.

(Reporting by Lawrence White and Phoebe Seers; Editing by Tommy Reggiori Wilkes)