(Adds detail)
By Huw Jones
LONDON, July 22 (Reuters) - Smaller banks will be given time
to reach targets for issuing debt to shore up their defences in
a crisis, the Bank of England said on Thursday as it seeks to
boost competition in a banking sector long dominated by a
handful of lenders.
Banks are required to issue MREL, or minimum requirement for
own funds and eligible liabilities, which is a form of debt that
can be written down to absorb losses and avoid repeating the 137
billion pound ($188.3 billion) taxpayer bailout of lenders in
Britain during the financial crisis more than a decade ago.
The targets were set under European Union rules, which
Britain now can change after leaving the bloc last December.
"Making it easier for firms to grow into MREL responds
directly to firms’ concerns about barriers to growth created by
the step up in MREL requirements as firms expand their balance
sheets," Bank of England Deputy Governor Dave Ramsden said in a
statement.
The central bank has authorised 27 new banks since 2013, but
Lloyds, Barclays, HSBC and NatWest
continue to dominate retail lending and the so-called
challenger banks have said that blunt thresholds for issuing
MREL hold them back from building market share.
The BoE proposed replacing its indicative threshold of 15-25
billion pounds with a notice period setting out when a lender
can enter transition to its MREL targets, if the company grows
beyond 15 billion pounds in total assets.
"The proposals for an extended transition path are
proportionate in implementation and directly respond to
stakeholder feedback arguing for a ‘smoother climb’," Ramsden
said.
"They are inherently flexible and agile as they allow for a
further extension if unforeseen circumstances demand it. And
they enhance the transparency of the regime by being clearer
when MREL requirements may start to apply to firms
individually."
($1 = 0.7274 pounds)
(Reporting by Huw Jones
Editing by Alison Williams and David Goodman)