The Bank of England is exploring ways to encourage lenders to use more of their regulatory capital buffers to boost economic growth. Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, stated during a conference in Spain on Tuesday that she wants to change 'the way banks manage their buffers' to free up more capital for lending. Breeden addressed the issue of 'management reserves,' which is the protective capital that banks choose to hold above regulatory requirements, and noted that lenders should feel able to draw on their capital without fear of a supervisory backlash. The Bundesbank is reportedly considering similar plans.
