The median UK bank has held roughly 6% excess capital on top of their minimum requirement over the past 20 years. What explains this behaviour if bank capital is costly to hold? In this paper, we use a newly constructed dataset on UK banks between 1989-2013 to study the determinants of this surplus - measured as excess capital on top of a bank-specific minimum requirement - and hypothesise that regulatory uncertainty has a significant role to play. Applying a methodology similar to Bloom et al (2016) & Eckley (2015), we construct our own measures of regulatory uncertainty in the banking sector as a whole, and for capital regulations specifically. We show that there is co-movement between our measures and those commonly used in the literature, but they reflect different underlying information. Next, using both time series and panel evidence, we document a positive relationship between UK banks’ capital surpluses and regulatory uncertainty, reflecting a precautionary motive for a rational loss-averse bank. A standard deviation increase in regulatory uncertainty increases bank surpluses by 0.12 standard deviations, and squeezes the cross-sectional distribution of capital surplus inwards as banks closer to their requirements begin to gradually build up their surpluses.