BoE plans to ease capital rules on banks in latest loosening of post-2008 controls
The Bank of England is easing capital rules for high street banks for the first time in a decade, marking the latest attempt to loosen regulations designed to protect the UK economy in the wake of the 2008 financial crisis,The central bank has announced it will lower capital requirements related to risk-weighted assets by one percentage point to about 13%, reducing the amount lenders must hold in reserve,Capital requirements act as a financial cushion against risky lending and investments on bank balance sheets,The Bank’s move, which is due to come into force in 2027, is designed to make it easier to lend to households and businesses,However, there are no explicit rules on how banks use the extra funding, meaning bosses could use the cash to pay shareholders if so inclined.
It comes as fresh stress tests show that the UK’s seven largest banks – Barclays, Lloyds Banking Group, Nationwide, NatWest, Santander UK and Standard Chartered – are strong enough to continue lending through “a severe but plausible” economic downturn,The Bank said its proposed new capital rules were “consistent with its view that the banking sector can support long-term growth in the real economy in both current and adverse economic environments”,It added that banks had tended to hold more capital than required, meaning that money was not used to issue loans,“Banks should have greater certainty and confidence in using their capital resources to lend to UK households and businesses,” the Bank’s financial policy committee (FPC) said,The central bank had announced in June it would be reviewing capital levels, having first assessed them in 2015 and issued an update in 2019.
It said that since the capital levels were last reviewed, banks had managed to continue issuing loans and mortgage despite “several macroeconomic shocks” including Covid and Russia’s full-scale invasion of Ukraine.The chancellor, Rachel Reeves, has put extra pressure on regulators to do more to stimulate growth, having this summer gone so far as to say rules and red tape were a “boot on the neck” of businesses and risked “choking off” innovation across the UK.The move could stoke concerns about weakening protections against UK bank failures, as the government continues to row back on regulations introduced after the 2008 financial crisis.Reeves appeared to subtly encourage cuts to bank capital requirements last week.In letter to the Bank’s governor, Andrew Bailey, released alongside the budget, she said she welcomed the review of bank capital requirements, adding that the process should “ensure the UK’s capital framework strikes the optimal balance to deliver resilience, growth and competitiveness”.
“The next steps in this work should identify actions that could support the supply of long-term capital for productive investment, particularly for high growth-potential firms seeking to scale up,” the chancellor’s letter added.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThere will also be pressure on banks to do more to support the UK economy after they narrowly escaped higher taxes and emerged as among the biggest winners from the budget.Tuesday’s announcement is the first time that bank capital levels have been cut since the 2008 banking crash, and comes despite FPC warnings that “risks to financial stability have increased during 2025”.That includes risks regarding the rise in valuations of artificial intelligence companies this year, which the FPC said “heightens the risk of a sharp correction”.Meanwhile, those AI firms have been taking on much more debt in order to build datacentres and compete in the global tech race, leaving the financial sector exposed if the AI bubble bursts.
“Deeper links between AI firms and credit markets, and increasing interconnections between those firms, mean that should an asset price correction occur, losses on lending could increase financial stability risks,” the Bank’s financial stability report said.The Bank also confirmed details of stress tests for the private credit industry.The tests are meant to assess potential systemic risks of the unregulated sector, particularly interconnectivity with regulated banks, amid concerns over potentially weak lending standards.Bailey said last month that the failures of US auto firms linked to the private credit sector had worrying echoes of the sub-prime mortgage crisis that kicked off the financial crisis.The IMF has warned that a downturn in the private credit sector could have ripple effects across the financial system, given that banks are increasingly exposed to a largely unregulated private credit industry.
There are concerns that a downturn could destabilise traditional banks that issue loans to the shadow banking sector,
ChatGPT-5 offers dangerous advice to mentally ill people, psychologists warn
ChatGPT-5 is offering dangerous and unhelpful advice to people experiencing mental health crises, some of the UK’s leading psychologists have warned.Research conducted by King’s College London (KCL) and the Association of Clinical Psychologists UK (ACP) in partnership with the Guardian suggested that the AI chatbotfailed to identify risky behaviour when communicating with mentally ill people.A psychiatrist and a clinical psychologist interacted with ChatGPT-5 as if they had a number of mental health conditions. The chatbot affirmed, enabled and failed to challenge delusional beliefs such as being “the next Einstein”, being able to walk through cars or “purifying my wife through flame”.For milder conditions, they found some examples of good advice and signposting, which they thought may reflect the fact OpenAI, the company that owns ChatGPT, had worked to improve the tool in collaboration with clinicians – though the psychologists warned this should not be seen as a substitute for professional help
How big tech is creating its own friendly media bubble to ‘win the narrative battle online’
At a time when distrust of big tech is high, Silicon Valley is embracing an alternative ecosystem where every CEO is a starA montage of Palantir’s CEO, Alex Karp, and waving US flags set to a remix of AC/DC’s Thunderstruck blasts out as the intro for the tech billionaire’s interview with Sourcery, a YouTube show presented by the digital finance platform Brex. Over the course of a friendly walk through the company offices, Karp fields no questions about Palantir’s controversial ties to ICE but instead extolls the company’s virtues, brandishes a sword and discusses how he exhumed the remains of his childhood dog Rosita to rebury them near his current home.“That’s really sweet,” host Molly O’Shea tells Karp.If you are looking to hear from some of tech’s most powerful people, you will increasingly find them on a constellation of shows and podcasts like Sourcery that provide a safe space for an industry that is wary, if not openly hostile, towards critical media outlets. Some of the new media outlets are created by the companies themselves
More than 1,000 Amazon workers warn rapid AI rollout threatens jobs and climate
More than 1,000 Amazon employees have signed an open letter expressing “serious concerns” about AI development, saying that the company’s “all-costs justified, warp speed” approach to the powerful technology will cause damage to “democracy, to our jobs, and to the earth.”The letter, published on Wednesday, was signed by the Amazon workers anonymously, and comes a month after Amazon announced mass layoff plans as it increases adoption of AI in its operations.Among the signatories are staffers in a range of positions, including engineers, product managers and warehouse associates.Reflecting broader AI concerns across the industry, the letter was also supported by more than 2,400 workers from companies including Meta, Google, Apple and Microsoft.The letter contains a range of demands for Amazon, concerning its impact on the workplace and the environment
After a teddy bear talked about kink, AI watchdogs are warning parents against smart toys
As the holiday season looms into view with Black Friday, one category on people’s gift lists is causing increasing concern: products with artificial intelligence.The development has raised new concerns about the dangers smart toys could pose to children, as consumer advocacy groups say AI could harm kids’ safety and development. The trend has prompted calls for increased testing of such products and governmental oversight.“If we look into how these toys are marketed and how they perform and the fact that there is little to no research that shows that they are beneficial for children – and no regulation of AI toys – it raises a really big red flag,” said Rachel Franz, director of Young Children Thrive Offline, an initiative from Fairplay, which works to protect children from big tech.Last week, those fears were given brutal justification when an AI-equipped teddy bear started discussing sexually explicit topics
One in 10 UK parents say their child has been blackmailed online, NSPCC finds
Nearly one in 10 UK parents say their child has been blackmailed online, with harms ranging from threatening to release intimate pictures to revealing details about someone’s personal life.The NSPCC child protection charity also found that one in five parents know a child who has experienced online blackmail, while two in five said they rarely or never talked to their children about the subject.The National Crime Agency has said that it is receiving more than 110 reports a month of child sextortion attempts, where criminal gangs trick teenagers into sending intimate pictures of themselves and then blackmail them.Agencies across the UK, US and Australia have confirmed a rising number of sextortion cases involving teenage boys and young adult males being targeted by cyber-criminal gangs based in west Africa or south-east Asia, some of which have ended in tragedy. Murray Dowey, a 16-year-old from Dunblane, Scotland, killed himself in 2023 after becoming a victim of sextortion on Instagram and Dinal De Alwis, 16, killed himself in Sutton, south London, in October 2022 after being blackmailed over nude photographs
Small changes to ‘for you’ feed on X can rapidly increase political polarisation
Small changes to the tone of posts fed to users of X can increase feelings of political polarisation as much in a week as would have historically taken at least three years, research has found.A groundbreaking experiment to gauge the potency of Elon Musk’s social platform to increase political division found that when posts expressing anti-democratic attitudes and partisan animosity were boosted, even barely perceptibly, in the feeds of Democrat and Republican supporters there was a large change in their unfavourable feelings towards the other side.The degree of increased division – known as “affective polarisation” – achieved in one week by the changes the academics made to X users’ feeds was as great as would have on average taken three years between 1978 and 2020.Most of the more than 1,000 users who took part in the experiment during the 2024 US presidential election did not notice that the tone of their feed had been changed.The campaign was marked by divisive viral posts on X, including a fake image of Kamala Harris cosying up to Jeffrey Epstein at a gala and an AI-generated image posted by Musk of Kamala Harris dressed as a communist dictator that had 84m views
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