Carney Offers Banks Liquidity-Rule Sweetener for Lending
By Jim Brunsden
The Bank of England moved to boost lending to consumers and businesses by the largest U.K. banks by offering to ease liquidity rules for institutions that meet capital targets. The central bank will allow the main U.K. lenders to shrink required holdings of low-yielding, easy-to-sell securities, such as government bonds, once they hold capital reserves equivalent to 7 percent of their risk-weighted assets, Governor Mark Carney said today in his first policy speech since taking over from Mervyn King in July. “The effect will be to lower total required holdings by 90 billion pounds ($139 billion), once all eight major banks and building societies meet the capital threshold,” Carney said at an event in Nottingham organized by the Confederation of British Industry. “That will help to underpin the supply of credit, since every pound currently held in liquid assets is a pound that could be lent to the real economy.” “The U.S. to date has taken the view that rules are minimums not to be transgressed regardless of stress, let alone policy rationales like hopes for higher lending,” Karen Shaw Petrou, managing partner of Washington-based research firm Federal Financial Analytics Inc. “With the BOE’s action, U.S. banks pushing back against this approach have an important ally, in effect, if not by intent.”
http://www.bloomberg.com/news/2013-08-28/carney-offers-banks-liquidity-rule-sweetener-for-lending-boost.html