BoE’s Sarah Breeden Calls for Global Review of Bank Capital Buffers Post-COVID

As global financial systems continue to adapt in the wake of the COVID-19 pandemic, Sarah Breeden, Deputy Governor of the Bank of England (BoE), is urging international regulators to come together and rethink how banks’ capital buffers are structured and used.

Speaking at a press conference following the release of the BoE’s Financial Stability Report, Breeden emphasized that the pandemic revealed significant differences in how effective various capital buffers were during times of crisis.

“One of the things that we learned through that was that some of our buffers are more usable than others,” Breeden said.

The COVID-19 Stress Test for Banking Systems

Capital buffers are extra reserves that banks are required to hold to protect against financial shocks and systemic risks. While designed to be deployed in times of stress, the pandemic highlighted a key issue: banks were hesitant to use certain buffers out of concern for market perception, regulatory penalties, or unclear guidance.

Breeden suggested that the global experience during the pandemic calls for a deeper examination and dialogue around the usability and appropriateness of different types of capital reserves.

“Trying to start a debate about the appropriateness of the various buffers we have internationally would be a really good thing to come out of this review,” she said.

BoE Capital Review Coming in December

Her comments come ahead of the BoE’s own review of capital requirements, set to be published in December. The review will assess the effectiveness, flexibility, and strategic intent of capital buffer frameworks within the UK and in relation to global banking standards.

Financial regulators across the world have already begun similar conversations, particularly around the countercyclical capital buffer (CCyB) and stress test regimes.

Why This Matters

A global review of capital buffer policies could lead to:

• More consistent international standards

• Greater confidence for banks to deploy buffers in crises

• Clearer communication between regulators and financial institutions

For policymakers and industry players alike, this is a critical opportunity to learn from the past and strengthen resilience for future economic shocks.