Bank of England · Oct 1, 2026
Marzio Bassanin argues in Bank Underground that the output floor could shift bank lending
Markdown · JSON · Original source
Published October 1, 2026, Marzio Bassanin argues in Bank Underground that ’s output floor could change which loans UK banks find attractive. The floor limits how far calculated using internal models can fall below those based on standardised approaches. Bassanin’s model suggests that, when the floor binds, banks would expand corporate lending more than mortgage lending compared with a regime based only on internal models. Because the floor is generally more binding for mortgages, the post expects banks to shift towards corporate loans and some riskier mortgages, and away from the safest mortgages, all else equal. Bassanin says this could reallocate credit towards relatively higher-risk finance that may support productive investment. He also argues that banks may adjust before the floor is fully implemented, drawing on studies of earlier regulatory changes; the post says early portfolio shifts may already be emerging. These are model-based expectations, not reported outcomes under the new floor. The model reduces bank balance sheets to mortgages and corporate loans, and the analysis sets aside the leverage ratio. Bassanin identifies testing whether a binding leverage ratio dampens the floor’s impact as a next step for research.
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
Source details
Original source date: Oct 1, 2026 (2026-10-01T08:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-05T08:53:23.477Z. First observed: 2026-10-23T19:03:43.937Z. Retrieved: 2026-10-23T19:05:36.835Z.
Referenced by
Recorded citations and public file attachments. A reference alone does not establish agreement or influence.
No public references recorded here yet.
Limits
Text as retrieved on October 23, 2026; originally published October 1, 2026. The post’s model reduces banks’ balance sheets to mortgages and corporate loans and sets aside the leverage ratio; its lending shifts are model-based expectations, not observed outcomes under the fully implemented floor.
Open question
Will a binding leverage ratio dampen the output floor’s effect on banks’ lending choices?
Source-stated
Marzio Bassanin says the output floor may shift lending towards corporate loans and some riskier mortgages, away from the safest mortgages.
it may tilt lending towards corporate loans and some riskier mortgages, and away from the safest mortgages.
Source-stated
The output floor limits how far risk-weighted assets calculated using internal models can fall below those based on standardised approaches.
limits how far capital requirements calculated using internal models can fall below those based on standardised approaches.
Source-stated
The model suggests the output floor would moderate the rise in credit-to-GDP during an economic expansion driven by a positive technology shock.
the output floor moderates the rise in the credit-to-GDP ratio during economic expansions by preventing RWAs from falling too far hence keeping capital requirements tighter.
Source-stated
The simulation finds a smaller increase in mortgages and a larger increase in corporate loans with the output floor than with internal models alone.
With the output floor, the increase in mortgages is milder – at the end of the simulation period mortgages are 0.4 percentage point lower – while the increase in the corporate loans higher – around 0.2 percentage point higher.
Source-stated
The post expects the floor to steer UK banks towards corporate loans and some riskier mortgages, and away from the safest mortgages, all else equal.
the output floor is expected to push UK banks towards riskier mortgages and corporate loans and away from the safest mortgages – assuming everything else constant.
Source-stated
The post argues that banks may respond before the floor is fully implemented, based on studies of earlier regulatory changes.
Past experience suggests that banks will not wait until the output floor is fully implemented in 2030 to respond.
Source-stated
Bassanin says future research should test whether a binding leverage ratio dampens the output floor’s impact.
A natural next step for future research will be to test whether a binding leverage ratio dampens the impact 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.
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.
Editorial provenance
Version 1. Publication ID: a3ee681b-528c-129a-c33c-daecdf24051c.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-05T08:48:42.512Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: 25184f8548f2abb60f1eee0eb00d225bf626443a3396981b484faadd361a39c0. Source text hash: c100587431d25ab8c15c36cd00c7969317212167631349ed8e5337403074c37a.
Revision and source-check history
Version 1 · 2026-11-05T08:53:23.477Z
Marzio Bassanin argues in Bank Underground that the output floor could shift bank lending
Published October 1, 2026, Marzio Bassanin argues in Bank Underground that ’s output floor could change which loans UK banks find attractive. The floor limits how far calculated using internal models can fall below those based on standardised approaches. Bassanin’s model suggests that, when the floor binds, banks would expand corporate lending more than mortgage lending compared with a regime based only on internal models. Because the floor is generally more binding for mortgages, the post expects banks to shift towards corporate loans and some riskier mortgages, and away from the safest mortgages, all else equal. Bassanin says this could reallocate credit towards relatively higher-risk finance that may support productive investment. He also argues that banks may adjust before the floor is fully implemented, drawing on studies of earlier regulatory changes; the post says early portfolio shifts may already be emerging. These are model-based expectations, not reported outcomes under the new floor. The model reduces bank balance sheets to mortgages and corporate loans, and the analysis sets aside the leverage ratio. Bassanin identifies testing whether a binding leverage ratio dampens the floor’s impact as a next step for research.
Original source
Bank of England · Article
Source details
Original source date: Oct 1, 2026 (2026-10-01T08:00:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-05T08:53:23.477Z. First observed: 2026-10-23T19:03:43.937Z. Retrieved: 2026-10-23T19:05:36.835Z.
Limits
Text as retrieved on October 23, 2026; originally published October 1, 2026. The post’s model reduces banks’ balance sheets to mortgages and corporate loans and sets aside the leverage ratio; its lending shifts are model-based expectations, not observed outcomes under the fully implemented floor.
Open question
Will a binding leverage ratio dampen the output floor’s effect on banks’ lending choices?
Source-stated
Marzio Bassanin says the output floor may shift lending towards corporate loans and some riskier mortgages, away from the safest mortgages.
it may tilt lending towards corporate loans and some riskier mortgages, and away from the safest mortgages.
Source-stated
The output floor limits how far risk-weighted assets calculated using internal models can fall below those based on standardised approaches.
limits how far capital requirements calculated using internal models can fall below those based on standardised approaches.
Source-stated
The model suggests the output floor would moderate the rise in credit-to-GDP during an economic expansion driven by a positive technology shock.
the output floor moderates the rise in the credit-to-GDP ratio during economic expansions by preventing RWAs from falling too far hence keeping capital requirements tighter.
Source-stated
The simulation finds a smaller increase in mortgages and a larger increase in corporate loans with the output floor than with internal models alone.
With the output floor, the increase in mortgages is milder – at the end of the simulation period mortgages are 0.4 percentage point lower – while the increase in the corporate loans higher – around 0.2 percentage point higher.
Source-stated
The post expects the floor to steer UK banks towards corporate loans and some riskier mortgages, and away from the safest mortgages, all else equal.
the output floor is expected to push UK banks towards riskier mortgages and corporate loans and away from the safest mortgages – assuming everything else constant.
Source-stated
The post argues that banks may respond before the floor is fully implemented, based on studies of earlier regulatory changes.
Past experience suggests that banks will not wait until the output floor is fully implemented in 2030 to respond.
Source-stated
Bassanin says future research should test whether a binding leverage ratio dampens the output floor’s impact.
A natural next step for future research will be to test whether a binding leverage ratio dampens the impact 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.
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.
Editorial provenance
Version 1. Publication ID: a3ee681b-528c-129a-c33c-daecdf24051c.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-05T08:48:42.512Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: 25184f8548f2abb60f1eee0eb00d225bf626443a3396981b484faadd361a39c0. Source text hash: c100587431d25ab8c15c36cd00c7969317212167631349ed8e5337403074c37a.
uncertain · 2026-11-05T08:48:42.512Z · anthropic/claude-opus-5.5
Publication: a3ee681b-528c-129a-c33c-daecdf24051c
attribution — pass: The post is correctly attributed to Marzio Bassanin on the Bank of England's Bank Underground blog. The reading attributes its expectations to him or to the post. The underlying model comes from a staff working paper by Acosta-Smith et al, which the post presents as "our" work, so calling it his model is acceptable.
Marzio Bassanin works in the Bank’s Prudential Framework Division.
summary — uncertain: The summary is faithful to the post's argument, caveats and research question. However, several central terms go unexplained for a lay reader: "internal models" versus "standardised approaches" (banks' own risk estimates versus fixed regulator-set weights), what it means for the floor to "bind", risk weights or risk-weighted assets, and the "leverage ratio" on which the question depends. None of these appear in the definitions list. Smallest repair: briefly gloss these terms, for example as a simple, risk-insensitive capital backstop for the leverage ratio.
They also face a leverage ratio, a simple risk-insensitive backstop based on capital and total exposures.
date — pass: October 1, 2026 matches the UTC day of originalPublished and the post's dateline of 01/10/2026; the second date shown next to it, 30/09/2026, is the publisher's alongside it. The reading includes no hindsight. The 2027–2030 phase-in and banks' early reactions are reported as the post's expectations, not outcomes. The page was modified after publication, but every date the reading relies on comes from the body of the original post. The evidence is a publisher page, so no archive disclosure is needed.
In the UK, it will be phased in gradually from 1 January 2027, starting at 60% and rising to 72.5% on 1 January 2030.
support — pass: All claims match their exact excerpts and are framed as model-based or expected effects. The claim that early shifts may already be emerging reflects the post's hedged wording. The page was edited after publication, but every cited passage is plainly part of the original article body. The reading supplies no unsupported benefits or costs.
Banks most likely to be affected by the output floor may already be adapting their strategies, with early signs of portfolio shifting emerging well before 2030.
media — pass: No media was selected, and no verified media candidates were supplied, so nothing was misidentified.
Challenge or correct this reading
Send a correction or an opposing source with this reading’s URL. Disagreement and uncertainty can remain unresolved.
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 referenceThe 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 referenceAn 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 referenceThe 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