Bank of England updates bank capital benchmark to 13%

The Bank of England’s Financial Policy Committee (FPC) published its December 2025 Financial Stability Report and updated its assessment of appropriate bank capital levels.

• Main announcement and headline actions:

  • The FPC updates its benchmark for the system-wide level of Tier 1 capital to around 13% of RWAs (≈ CET1 ≈11%), one percentage point lower than its previous benchmark; it maintains the UK CCyB at 2%. The 2025 Bank Capital Stress Test shows the aggregate CET1 ratio falling from 14.5% to a low point of 11.0% (year 1) but no individual bank was required to strengthen capital. The Bank published its assessment of bank capital requirements alongside the FSR and invites evidence to FPCBankCapitalReview@bankofengland.co.uk (deadline for written feedback: 2 April 2026).

• Background, concrete details and other actions:

  • The FSR flags elevated market risks including stretched valuations in AI-focused technology companies (AI firms account for a large share of recent equity returns) and cites industry estimates that AI infrastructure spending over the next five years could exceed $5 trillion; it notes increasing debt financing for AI, and warns of spillovers to credit markets. The FPC supports PRA Solvency II reforms and the MAIA, noting an industry commitment to invest £100 billion in UK productive assets over 10 years; the PRA’s MAIA policy statement (17/25) came into effect 27 October 2025. The Bank will run a System-Wide Exploratory Scenario (SWES) on private markets and published a discussion paper on gilt-repo market reforms (work to follow). Other details: Bank contingency facility CNRF opened for applications in January 2025; private-market banking-book exposures estimated around £136bn (commitments) and combined private-market + sponsor exposures around £173bn; hedge fund net gilt repo borrowing reached ~£100bn (Nov 2025).