The LCR, together with individually set ‘Pillar 2 add-ons’ to address additional risks (including risks from margined derivatives and intraday volatility), set the UK minimum amount of high quality liquid assets (HQLA) that a bank is expected to hold in normal times. This minimum amount of HQLA constitutes what we call the quantitative individual liquidity guidance (ILG). 17. Bank of England Financial Stability Report, June 2018 18. For example, see PRA Supervisory Statement 24/15 'The PRA's approach to supervising liquidity and funding risks',  Page 13 Section 4 – Drawing down liquid asset buffers, June 2015 19. See Speech by Jon Cunliffe ‘Learning from the dash for cash – findings and next steps for margining practices’, February 2022; and Speech by Andrew Hauser ‘Seven Moments in Spring: Covid-19, financial markets and the Bank of England’s balance sheet operations’, June 2020 20. Speech by Andrew Hauser ‘Why central banks need new tools for dealing with market dysfunction’, January 2021 21. See Financial Stability Board (2021)  analysis on Covid-19 support measures. 22. BCBS (2021), ‘Early lessons from the Covid-19 pandemic on the Basel reforms’  , Implementation report. 23. For example, Gerba and Katsoulis (2021) show evidence for the period 2016-2020 that where banks were increasing LCRs, they reduced longer-term reverse repo lending against lower quality collateral. 24. BCBS (2021), ‘Early lessons from the Covid-19 pandemic on the Basel reforms’ 25. BIS (2022), ‘Market dysfunction and central bank tools’  , Implementation report. , Markets Committee Paper. 26.
And this is the new topic I would like to focus the second part of my speech today. In summary, there is evidence suggesting that banks may be overly reluctant to use their liquid asset buffers when facing liquidity pressures. This could have negative impacts on markets and the real economy, and means that central banks may need to intervene faster and to a greater extent than is desirable. But before I discuss liquidity buffers, let me summarise my most recent thinking on capital buffers and float a potential way forward. Impediments to capital buffer usability and policy implications We now have clear evidence that fear of breaching regulatory thresholds played a crucial role in affecting banks’ behaviours during the pandemic. Banks mostly did not need to use their buffers  Page 3  due to sizable support from authorities, but those which got nearer to regulatory buffers have reinforced their capital ratios to a greater extent. The importance of market stigma as a factor in banks’ reluctance to use buffers has been confirmed in many conversations I have had with bankers during the peak of the pandemic crisis and thereafter. It has also been reaffirmed by empirical evidence. [3] The evidence shows that firms’ reluctance to use their buffers can have a negative impact on lending. Firms which entered the pandemic with low capital headrooms, were more likely to constrain lending during the stress.