Metro Bank handed capital boost from banking watchdog
Metro Bank is set to benefit from a major capital boost after regulators reclassified its status under new financial rules. The Prudential Regulation Authority (PRA) confirmed the bank will now face lower capital requirements, easing its financial burden from 2026 onwards. The move follows broader changes to the UK’s minimum requirement for own funds and eligible liabilities (MREL) regime.
The MREL rules, introduced after the 2008 financial crisis, force banks with assets between £15bn and £25bn to hold a regulatory buffer. This ensures taxpayers are protected from future bailouts. In July, the Bank of England raised the MREL threshold to between £25bn and £40bn, a shift that directly benefits mid-sized lenders like Metro Bank.
Under the new classification, Metro Bank’s MREL requirement has been cut to the minimum level of 13.7%. This marks a significant reduction from its previous obligation. The bank’s CEO, Daniel Frumkin, welcomed the decision, stating it would strengthen lending capacity and increase shareholder value. The wider banking sector has also responded positively. Nigel Terrington, CEO of Paragon Bank, noted that the changes improve growth prospects for mid-cap lenders. Meanwhile, analysts at the Royal Bank of Canada upgraded Metro Bank’s stock rating to 'Outperform' in light of the reclassification. Another institution affected is Citibank Europe plc, which the PRA has reclassified as a 'transfer bank' under the new regime. From 2026, it must hold eligible liabilities equal to 18.6% of its risk-weighted assets to bolster its resolution capabilities.
The reclassification will reduce Metro Bank’s capital demands, freeing up funds for expansion. Citibank Europe plc, meanwhile, must now meet stricter requirements to ensure financial stability. Both moves reflect the PRA’s ongoing adjustments to the MREL framework, designed to balance risk and growth in the banking sector.
