The Bank of England is moving to relax its leverage ratio framework for banks, a shift that could fundamentally change how UK lenders interact with the government bond market.
The central bank plans to lay out the specifics in its Financial Stability Report, scheduled for release on July 7, 2026.
What’s actually changing and why it matters
The UK’s minimum leverage ratio currently sits at 3.25%. The ratio treats all assets the same: a risky corporate loan and a UK government bond get identical treatment on the balance sheet, creating a disincentive to load up on government debt.
The proposed reform would exclude unencumbered gilts from leverage calculations. “Unencumbered” just means gilts that haven’t been pledged as collateral for other transactions.
