Bank of England says bank buffer may need reworking to handle crises

© Reuters. FILE PHOTO: The Bank of England in London, Britain

LONDON (Reuters) – The design of bank buffers may need changing to encourage lenders to tap their capital and avoid a credit crunch in the economy, the Bank of England’s Deputy Governor Jon Cunliffe said on Thursday.

Even though regulators have given banks the green light to dip into buffers to help businesses survive the COVID-19 hit to the economy, there was a “first mover disadvantage” to doing so as it could limit dividends and other payouts, Cunliffe said.

“We will need to think through this question more as the recovery – albeit a bumpy one – gathers pace, as impairments mount and it becomes clearer how permanent the damage will be,” Cunliffe told an online event hosted by the Washington-based Peterson Institute for International Economics.

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