LONDON, March 5 (Xinhua) -- The Bank of England's Prudential Regulation Authority (PRA) on Wednesday proposed raising the retail deposit threshold under its leverage ratio rules from 50 billion pounds (64 billion U.S. dollars) to 70 billion pounds, aiming to provide smaller banks with greater flexibility for growth while maintaining financial stability.

The leverage ratio, introduced after the 2008 financial crisis, requires banks to hold capital equal to at least 3.25 percent of their total exposures to mitigate excessive borrowing risks. Currently, banks with more than 50 billion pounds in retail deposits or 10 billion pounds in non-United Kingdom (UK) assets must comply with the rule.

According to the PRA, the proposed adjustment reflects inflation and nominal GDP growth since 2016, ensuring that the threshold continues to target major UK institutions while allowing smaller lenders to operate outside the regime until they reach the higher limit.

Sam Woods, CEO of the PRA and deputy governor for Prudential Regulation, underscored the importance of proportionality in financial oversight.

"Guarding against excessive leverage is essential for stability, but we must do so in a way that supports growth. This change allows smaller banks to innovate and expand before entering the regime," he said.

Fewer than five UK banks and building societies, primarily involved in mortgage lending, are expected to be affected by the revision. Collectively, these institutions account for about 9 percent of UK real economy lending and 3 percent of total leverage. The PRA estimates annual savings of 130,000 pounds for these firms under the new threshold.

The public consultation on the proposed changes will remain open until June 5, with final rules expected by early next year. (1 pound = 1.29 U.S. dollar) Enditem

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