ABSTRACT
This chapter interrogates Bank of England thinking on capitalization and resilience, arguing that an understanding of the former provides crucial insights into the latter. It is argued that the Bank of England has two conceptions of resilience, one of resilient institutions and another of a resilient financial system. Further, the chapter provides examples of where the Bank acknowledged the fragility of the way that capital absorbs losses. Initially the Bank’s response to this was to call for increased market discipline, but more recently the Bank believes that resilience is promoted by the capitalization of both institutions and the system through stress testing and the systemic risk buffer.
