# Acosta-Smith, Bassanin and Sabuga argue in Bank of England paper that output floor shifts lending [Canonical reading](https://escapemeridian.com/readings/acosta-smith-bassanin-and-sabuga-argue-in-bank-of-england-paper-0f93e2ba) The Bank of England published Jonathan Acosta-Smith, Marzio Bassanin and Ivy Sabuga’s working paper on September 4, 2026. The authors assess the output floor, a regulatory constraint in the Basel III framework that acts as a backstop against banks setting risk-weighted assets (RWA) too low relative to the riskiness of their exposures. Their model shows the floor counteracts downward pressure on modelled RWA during economic expansions, reducing the cyclicality of risk-weighted capital requirements. The authors say this mitigates increases in the credit-to-GDP ratio and supports the objectives of the macroprudential authority. For the UK economy, their model finds that during an expansion the floor dampens mortgage lending growth and amplifies lending growth to firms, with the former effect more than offsetting the latter. This points to a trade-off within the model: the policy constraint changes not only overall credit dynamics but also how lending growth is distributed across sectors. The page describes staff working papers as research in progress intended to encourage comments and debate. The reported results are model-based; the page does not establish how the effects compare with observed outcomes or how they vary beyond the UK estimate. Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims. ## Original source Bank of England · Article Original source date: Sep 4, 2026 (2026-09-04T13:01:00.000Z). Date basis: Date supplied by the publisher’s feed. Added to Escape Meridian: 2026-11-02T00:17:19.181Z. First observed: 2026-10-23T20:33:42.274Z. Retrieved: 2026-10-23T20:35:36.745Z. - [Macroeconomic dynamics of the output floor](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Limits The paper presents model-based findings; the page does not report comparisons with observed lending outcomes. The reported sectoral estimate is for the UK economy; the page does not describe results for other economies. Text as retrieved on October 23, 2026; originally published September 4, 2026. ## Open question How closely do the modelled changes in mortgage and firm lending during UK expansions match observed lending? ## Source-stated The authors say the output floor counteracts downward pressure on modelled RWA during expansions and reduces the cyclicality of risk-weighted capital requirements. > it counteracts the downward pressure on modelled RWA during economic expansions and, in turn, reduces the cyclicality of risk-weighted capital requirements. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated The authors say the floor mitigates increases in the credit-to-GDP ratio and supports the macroprudential authority’s objectives. > This mitigates increases in the credit-to-GDP ratio and supports the objectives of the macroprudential authority. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated For the UK economy, the authors find that during an expansion the floor dampens mortgage lending growth and amplifies lending growth to firms, but the mortgage effect is larger. > during an expansion the output floor dampens the growth of mortgage lending but amplifies the expansion of lending to firms, although the latter effect is more than offset by the former. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated The Bank of England says staff working papers present research in progress and aim to encourage comments and debate. > Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated The paper was published on September 4, 2026. > Published on > 04 September 2026 - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source and contributor context Bank of England · Publisher The publisher is identified here. No individual author has been inferred. ## Source media Media retrieval status: unchecked. ## Terms and references Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement. ## Basel III An internationally agreed set of measures from the Basel Committee on Banking Supervision, developed in response to the 2007-09 financial crisis to strengthen the regulation, supervision and risk management of banks. - [Definition reference](https://www.bis.org/committees/bcbs/standards) ## Risk-weighted assets A bank's total assets, each multiplied by a risk weight reflecting how risky that type of asset is perceived to be; the less risky an asset, the less capital the bank must hold for it. - [Definition reference](https://www.bankingsupervision.europa.eu/about/banking-supervision-explained/html/hold_capital.en.html) ## Capital requirements The capital a bank must hold to pay for potential losses: its assets, such as loans and securities, are added up and a percentage of them is set aside as capital. - [Definition reference](https://www.bankofengland.co.uk/explainers/what-is-capital) ## Editorial provenance Version 1. Publication ID: 3c5bbb33-c883-8748-bc8b-d71231c888dd. Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5. Source check: passed by anthropic/claude-opus-5.5 on 2026-11-02T00:16:59.523Z. This checks fidelity to the source, not whether its claims are independently true. Editorial selection: accept; reasons: bridge\_admitted\_by\_model. Observation: 4cdc526f51f90a91975053f9bba62d07eb9bca4da5fa6161dec32d4686bc85ce. Source text hash: bd8a0970fba6a7ad15375717618ef47cf5517bd480b407169b6cdf4ea6679255. ## Revision and source-check history ### Version 1 — 2026-11-02T00:17:19.181Z The Bank of England published Jonathan Acosta-Smith, Marzio Bassanin and Ivy Sabuga’s working paper on September 4, 2026. The authors assess the output floor, a regulatory constraint in the Basel III framework that acts as a backstop against banks setting risk-weighted assets (RWA) too low relative to the riskiness of their exposures. Their model shows the floor counteracts downward pressure on modelled RWA during economic expansions, reducing the cyclicality of risk-weighted capital requirements. The authors say this mitigates increases in the credit-to-GDP ratio and supports the objectives of the macroprudential authority. For the UK economy, their model finds that during an expansion the floor dampens mortgage lending growth and amplifies lending growth to firms, with the former effect more than offsetting the latter. This points to a trade-off within the model: the policy constraint changes not only overall credit dynamics but also how lending growth is distributed across sectors. The page describes staff working papers as research in progress intended to encourage comments and debate. The reported results are model-based; the page does not establish how the effects compare with observed outcomes or how they vary beyond the UK estimate. ## Original source Bank of England · Article Original source date: Sep 4, 2026 (2026-09-04T13:01:00.000Z). Date basis: Date supplied by the publisher’s feed. Added to Escape Meridian: 2026-11-02T00:17:19.181Z. First observed: 2026-10-23T20:33:42.274Z. Retrieved: 2026-10-23T20:35:36.745Z. - [Macroeconomic dynamics of the output floor](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Limits The paper presents model-based findings; the page does not report comparisons with observed lending outcomes. The reported sectoral estimate is for the UK economy; the page does not describe results for other economies. Text as retrieved on October 23, 2026; originally published September 4, 2026. ## Open question How closely do the modelled changes in mortgage and firm lending during UK expansions match observed lending? ## Source-stated The authors say the output floor counteracts downward pressure on modelled RWA during expansions and reduces the cyclicality of risk-weighted capital requirements. > it counteracts the downward pressure on modelled RWA during economic expansions and, in turn, reduces the cyclicality of risk-weighted capital requirements. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated The authors say the floor mitigates increases in the credit-to-GDP ratio and supports the macroprudential authority’s objectives. > This mitigates increases in the credit-to-GDP ratio and supports the objectives of the macroprudential authority. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated For the UK economy, the authors find that during an expansion the floor dampens mortgage lending growth and amplifies lending growth to firms, but the mortgage effect is larger. > during an expansion the output floor dampens the growth of mortgage lending but amplifies the expansion of lending to firms, although the latter effect is more than offset by the former. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated The Bank of England says staff working papers present research in progress and aim to encourage comments and debate. > Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate. - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source-stated The paper was published on September 4, 2026. > Published on > 04 September 2026 - [Supporting source](https://www.bankofengland.co.uk/working-paper/2026/macroeconomic-dynamics-of-the-output-floor) ## Source and contributor context Bank of England · Publisher The publisher is identified here. No individual author has been inferred. ## Source media Media retrieval status: unchecked. ## Terms and references Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement. ## Basel III An internationally agreed set of measures from the Basel Committee on Banking Supervision, developed in response to the 2007-09 financial crisis to strengthen the regulation, supervision and risk management of banks. - [Definition reference](https://www.bis.org/committees/bcbs/standards) ## Risk-weighted assets A bank's total assets, each multiplied by a risk weight reflecting how risky that type of asset is perceived to be; the less risky an asset, the less capital the bank must hold for it. - [Definition reference](https://www.bankingsupervision.europa.eu/about/banking-supervision-explained/html/hold_capital.en.html) ## Capital requirements The capital a bank must hold to pay for potential losses: its assets, such as loans and securities, are added up and a percentage of them is set aside as capital. - [Definition reference](https://www.bankofengland.co.uk/explainers/what-is-capital) ## Editorial provenance Version 1. Publication ID: 3c5bbb33-c883-8748-bc8b-d71231c888dd. Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5. Source check: passed by anthropic/claude-opus-5.5 on 2026-11-02T00:16:59.523Z. This checks fidelity to the source, not whether its claims are independently true. Editorial selection: accept; reasons: bridge\_admitted\_by\_model. Observation: 4cdc526f51f90a91975053f9bba62d07eb9bca4da5fa6161dec32d4686bc85ce. Source text hash: bd8a0970fba6a7ad15375717618ef47cf5517bd480b407169b6cdf4ea6679255. ### passed — 2026-11-02T00:16:59.523Z — anthropic/claude-opus-5.5 Publication: 3c5bbb33-c883-8748-bc8b-d71231c888dd attribution — pass: The reading correctly attributes the staff working paper to Jonathan Acosta-Smith, Marzio Bassanin and Ivy Sabuga, published by the Bank of England. The page is a single paper abstract; the related-paper list is a sidebar, not the source. > Staff Working Paper No. 1,206 Jonathan Acosta-Smith, Marzio Bassanin and Ivy Sabuga summary — pass: The summary explains the output floor in plain terms and faithfully conveys the findings: lower cyclicality, a smaller rise in credit-to-GDP, and UK sectoral effects. Basel III, risk-weighted assets and capital requirements are defined beside the reading. 'Credit-to-GDP ratio', 'cyclicality' and 'macroprudential authority' lack tooltips; adding them to the term library is suggested, but the central meaning stays readable. The question follows from the model-based nature of the evidence. > The output floor is designed to provide a backstop against excessively low risk-weighted assets (RWA) modelled by banks relative to the riskiness of the underlying exposures. date — pass: evidence.originalPublished is 2026-09-04T13:01Z, which matches the page's dateline and the reading's September 4, 2026. The October 2026 items are listings of other papers and are not used. This is a publisher page, so no archive disclosure is needed. The reading contains no hindsight framing. > Published on 04 September 2026 support — pass: Each claim matches the abstract verbatim. The statement that the mortgage effect is larger is supported by 'more than offset'. The 'trade-off within the model' framing is a mild, model-scoped inference from the opposing sectoral effects. The limitations correctly note the paper is model-based and the estimate is for the UK, without inventing outcomes. > during an expansion the output floor dampens the growth of mortgage lending but amplifies the expansion of lending to firms, although the latter effect is more than offset by the former. media — pass: No media was selected, and no verified media candidates were supplied, so no media identity or relevance issue arises. ## Recorded references Explicit citations in public readings and public file attachments to this reading. Shared topics are not citations. Other artifact types need an explicit reference adapter. No public references recorded here yet. [Reference data (JSON)](/readings/0f93e2baae28afdc18ed0003658e63048e7281715672839ebda2719e333184b1/references.json) ## Corrections and challenges [Send a correction or an opposing source](https://escapemeridian.com/corrections/) [JSON record](https://escapemeridian.com/readings/acosta-smith-bassanin-and-sabuga-argue-in-bank-of-england-paper-0f93e2ba.json)