HM Treasury has published the Chancellor’s annual remit and recommendations for the Bank of England’s Financial Policy Committee (FPC) for 2025, setting out priorities for pursuing its financial stability objective while supporting the government’s economic policy. The Bank of England has also published the FPC’s formal response, setting out how it has acted and intends to act against the recommendations. The remit asks the FPC to continue prioritising systemic resilience in the non-bank financial sector and associated markets, including private markets and core sterling markets, alongside continued vigilance on global and geopolitical risks. It also highlights non-financial risks, including cyber and operational resilience, third-party dependencies under the critical third parties regime, and financial stability risks linked to emerging technologies such as artificial intelligence, as well as climate and nature-related financial risks. On the interaction of objectives, the remit calls for transparent communication of any conflicts between financial stability and growth support, continued coordination with the Prudential Regulation Authority, Financial Conduct Authority and Monetary Policy Committee, and a focus on risks to public funds. In its response, the FPC said it has refreshed its assessment of the overall level of bank capital requirements and now judges the system-wide benchmark for Tier 1 capital to be around 13% of risk-weighted assets, down from around 14%, while warning that materially lower requirements could reduce long-run expected GDP. It also highlighted adjustments to mortgage lending implementation of the loan-to-income flow limit, including a £150 million per annum de minimis threshold and modifications for nine lenders representing about 40% of mortgage lending to allow higher shares of high loan-to-income lending at firm level while aiming to keep the aggregate limit at 15%. Looking ahead, the FPC set out plans for a second System-Wide Exploratory Scenario focused on private markets, with firms’ active involvement expected to complete in 2026 and a final report planned for the first half of 2027, and noted that the main bank capital stress test has moved to a biennial cycle with the next exercise due in 2027.
HM Treasury 2025-11-26
UK's HM Treasury issues the 2025 remit for the Bank of England Financial Policy Committee and the committee sets a Tier 1 capital benchmark of around 13%
HM Treasury issued the Chancellor’s 2025 remit for the Bank of England’s Financial Policy Committee (FPC), emphasizing systemic resilience in non-bank financial sectors and vigilance on global risks. The FPC's response includes a revised Tier 1 capital benchmark of 13% of risk-weighted assets and adjustments to mortgage lending limits. Plans for a second System-Wide Exploratory Scenario and a biennial bank capital stress test were also outlined.