The Bank of England lowered its capital buffer requirements for banks as the outlook for financial stability turned challenging after the “Brexit” vote.

In its bi-annual Financial Stability Report, released Tuesday, the bank also vowed to take more actions to ensure stability in the financial system in the face of crystallizing risks.

The Financial Policy Committee of the bank trimmed the countercyclical capital buffer rate to zero percent from 0.5 percent of banks’ U.K. exposures with immediate effect.

The FPC expects to maintain this zero percent countercyclical capital buffer rate until at least June 2017. The decision to reduce the buffer reverses a decision it took in March.

The bank also said the regulatory capital buffers will be reduced by GBP 5.7 billion, thus increasing the amount available for lending to British households and businesses by up to GBP 150 billion.

“The UK has entered a period of uncertainty and significant economic adjustment,” BoE Governor Mark Carney said.

“The efforts of the Bank of England will not be able fully and immediately to offset the market and economic volatility that can be expected while this adjustment proceeds,” he added.

The FPC will ensure that firms do not increase their dividend after the eased capital buffer requirements.

Further, the bank judged that risks associated with domestic credit were no longer subdued. A number of economic and financial risks are materializing, the report said.

The FPC strongly expects the banks to continue to support the real economy, by drawing on buffers as necessary.

The bank is monitoring closely the key five risks including deterioration in investor appetite for U.K. assets. Policymakers are also watching the potential for buy-to-let investors to behave procyclically in the housing market.

“The core of this [financial] system is very strong, we may see some volatility, we may see things move around, but the system is going to be there for someone who wants to buy a house or a business person with a viable plan,” Carney said.

IHS Global Insight Economist Howard Archer said that the sharp worsening in the financial sector indicators is inevitable given the serious new uncertainties faced by the U.K. economy. However, financial market dislocation currently is of a far smaller magnitude than during the wider full-scale financial crises, he added.

James Knightley, an ING Bank NV economist, expects the BoE to try and give the economy a bit of a boost by cutting rates by 25 basis points at the August MPC with quantitative easing eventually expanded up to GBP 500 billion.

The material has been provided by InstaForex Company – www.instaforex.com