View more on these topics

BoE tells banks to raise £25bn extra capital without dip in lending

Bank-of-England-BoE-Panarama-480.jpg

The Bank of England’s financial policy committee has ordered UK banks to raise an extra £25bn in capital without cutting back on business or mortgage lending.

In a report covering its meeting last week, published today, the FPC sought to address FSA concerns that banks are not holding enough capital to cover high risk assets and future conduct risk while also over-valuing assets.

Taken together, FSA measures would have required an extra £50bn of capital but the FPC says some banks already meet Basel III requirements and opted for half that amount.

The FPC called on the Prudential Regulation Authority to impose the “significantly higher” costs without harming business and mortgage lending.

It states: “The PRA should ensure that major UK banks and building societies meet these requirements by issuing new capital or restructuring balance sheets in a way that does not hinder lending to the economy. 

“Any newly-issued capital, including contingent capital, would need to be clearly capable of absorbing losses in a going concern to enable firms to continue lending.”

Confederation of British Industry director for competitive markets Matthew Fell says it is crucial that banks have high capital to guard against future shocks.

But he says: “While the FPC wants banks to meet additional capital levels in a way that will not restrict lending, it is difficult to see how this can be achieved in practice.”

The FPC also said the PRA should ensure banks have credible transition plans to meet the higher targets under Basel III in 2019.

It recommended the PRA should develop proposals for stress testing UK banks to assess capital adequacy and test any threats identified by the FPC.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. They say ; “The PRA should ensure that major UK banks and building societies meet these requirements by issuing new capital or restructuring balance sheets in a way that does not hinder lending to the economy.

    And for an encore could they please tell me how to lose weight whislt eating the same amount of food and taking no more exercise.

    honestly! its like saying your new green energy policy is to build a perpetual motion machine

  2. If they implemented the BRADBURY POUND this problem would disappear.

  3. thanks for sharing this wonderful information,good post,

  4. i dnt think so that it appears again….

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com