What Happens When You Make U.K. Banks Safer?

Forcing banks to shrink their balance sheets and hold more capital is self-defeating if it doesn't lead them to boost lending to the real economy.

Safe doesn't have to mean useless.

Photographer: Simon Dawson/Bloomberg

The latest test of the U.K. financial sector's resilience delivers a clean bill of health to seven of the nation's eight biggest banks, with only the ailing Co-Operative Bank deemed deficient. Forcing banks to shrink their balance sheets and hold more capital, however, is somewhat self-defeating if improved health doesn't lead them to boost lending to the real economy.

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