A senior banking industry leader spoke about major changes to the law
Major changes to UK banking regulations could have a big impact for Nationwide Building Society and other financial providers. A senior banking regulator has updated MPs on the matter.
Katharine Braddick appeared before the Treasury Committee to discuss the oversight of the banking sector. This comes after she was recently appointed as the new deputy governor for prudential regulation at the Bank of England and chief executive of the Prudential Regulation Authority. She is set to take up the position in June 2026.
Among the questions put to her by the committee was one concerning the leverage ratio buffers that limit the operations of building societies such as Nationwide. The question was put to her after the Building Societies Association previously told MPs that overhauling these capital restrictions could unlock significant potential within the sector.
Sarah Harrison, chief executive of the association, told the committee previously: “At the moment, in the UK we have certain requirements in the prudential regulatory space, to require capital to be retained, often as a ratio of capital to assets, for good prudential reasons. Normally, the levels are set internationally but in the UK we’ve added a UK requirement, which is known as the leverage ratio buffer.”
These restrictions are designed to ensure lenders maintain sufficient reserves to sustain their operations should their investments or loan repayments fall through. Ms Harrison said: “In practice, what that means is some of the obligation on some of our building society members is to hold a lot more capital than is necessarily reflective of their risk portfolio.”
More mortgage lending
She said that Nationwide had told her that without the buffer, the organisation could potentially release an additional £30billion in capital for business or mortgage lending.
When asked for her opinion on the matter, Ms Braddick was unwilling to commit to anything. She told the committee: “If you do not mind, I will resist being drawn on that question until I am in role and have access to better technical information.”
Nationwide was previously asked whether these capital regulations ought to be eased. A spokesperson said: “Reducing leverage buffers would support additional lending to both individuals, via mortgage lending, and SMEs, through business loans.
“With the Government’s ambition to double the size of the mutuals sector, leverage ratio reform would support the sector’s growth potential, where current leverage requirements can often constrain further lending activity for lower risk providers.”
