The Bank of England moves to prevent a post-Brexit credit-crunch

WHILE politicians run around like headless chickens, the Bank of England, at least, is trying to stabilise the British economy. Within hours of the announcement of the EU referendum result, Mark Carney, the bank’s governor, reassured investors that the economy was sound. And on July 5th, through a piece of arcane but important financial regulation, the bank took the first real step to promote financial stability when it announced the relaxation of capital requirements for banks, in a bid to stave off a credit crunch.

Earlier this year Britain was experiencing rapid credit growth. In March the bank’s financial-policy committee thus announced that it would raise the “countercyclical capital buffer” (CCB), a requirement for banks to have an additional cushion of capital to absorb unexpected losses. The CCB was to increase from 0% of banks’ loans in Britain to 0.5% in March 2017, eventually rising to 1%. This would have required banks to have about £10 billion ($13.1 billion) in extra equity funding, making the financial system more resilient in the case of a credit bust.