The Bank of England is preparing to ease capital requirements for banks as part of a broader regulatory overhaul aimed at making rules more proportionate and effective, despite raising concerns about emerging risks to financial stability. The Bank’s Financial Policy Committee announced it will collaborate with other regulators on a package of reforms intended to adjust capital rules, potentially unlocking billions of pounds of additional lending capacity for the country’s leading banks.

The announcement comes amid warnings that the rapid advancement of artificial intelligence technology this year has heightened vulnerabilities related to cyber threats and operational disruptions within the financial sector. The Bank noted that these risks extend beyond AI, reflecting broader systemic challenges to operational resilience.

Bank of England Governor Andrew Bailey addressed questions regarding the timing of the planned relaxation of capital requirements. He described the proposed adjustments as “targeted” and “appropriate,” emphasizing that they are designed to balance support for the banking system while maintaining robust safeguards against potential threats. The Bank’s move underscores its intent to modernize regulatory frameworks in light of evolving financial and technological landscapes.

While the reforms could enable banks to deploy greater capital for lending and economic activity, the Bank’s warnings highlight ongoing concerns about the sector’s exposure to novel risks. The planned changes aim to ensure that capital requirements remain effective in safeguarding the financial system without imposing unnecessary constraints on banks amid shifting operational risks.