BANK of England deputy governor Charlie Bean yesterday said that the big UK banks would be "well advised to take advantage of any opportunity" to strengthen capital so they can ride out any further economic deterioration without having to constrain lending.
Mr Bean, in a speech to a Council of Mortgage Lenders conference, offered this advice to the big UK banks even though he acknowledged they would not be required to raise capital as part of the deal among European leaders to “buttress the resilience” of the Continent’s banking sector through recapitalisation.
He noted recent “heightened funding difficulties” of UK banks given their “inter-linkages with euro-area banks”.
Mr Bean said: “While the major UK banks will not be required to raise capital, they would nevertheless be well advised to take advantage of any opportunity that does arise to further strengthen their capital and liquidity buffers, thereby putting themselves in a better position to withstand any further deterioration in conditions, without needing to constrain lending.”
He acknowledged the Bank of England Monetary Policy Committee’s view of the economic outlook had “shifted dramatically” in recent months.
He identified the two primary drivers of the slowdown in growth as “heightened tension in financial and bank funding markets associated with the twin euro-area banking and sovereign debt crises”, and the “substantial rise in energy and other commodity prices”.
He noted the latter influence had borne down further on consumers, adding: “That has added to the squeeze on real household incomes … taking place as a result of earlier increases in energy and other import prices, together with the increase in the standard rate of VAT to 20%.”
He calculated, in the eight quarters since the trough of the recession in the middle of 2009, real household income had fallen 2.5%, and he said it was probable it would have dropped in the second half of this year too.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article