LONDON, July 5 (UPI) -- The Bank of England eased capital requirements for British banks Tuesday from 0.5 percent to zero to shore up confidence in the banks following the June 23 Brexit vote.
"This is a major change," Bank of England governor Mark Carney said at a press conference. "It means that three-quarters of UK banks, accounting for 90% of the stock of UK lending, will immediately -- immediately -- have greater flexibility to supply credit to UK households and firms."
The move reduces the amount of cash banks must have on hand by $7.5 billion, and raises banks' ability to lend by up to $195 billion. The buffer, regarded as an extra stock of available equity and designed to be reduced during an economic downturn, will stay at zero through at least June 2017.
The June 23 referendum, in which British citizens voted to leave the European Union, shook British politics and lowered the value of the British pound, as uncertain investors found less risky assets.
The move by the bank Tuesday, disclosed in its biannual Financial Stability Report, is an attempt to assure lenders and borrowers the British financial system remains firm, and that despite the political upheaval, there is no banking crisis..
The report also said that risks identified before the referendum had "begun to crystallize," and that "the current outlook for U.K. financial stability is challenging."
"There will be a period of uncertainty and adjustment following the result of the referendum. It will take time for the United Kingdom to establish new relationships with the European Union and the rest of the world. Some market and economic volatility is to be expected as this process unfolds."