This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.bbc.co.uk/go/rss/int/news/-/news/business-15984291
The article has changed 7 times. There is an RSS feed of changes available.
Version 0 | Version 1 |
---|---|
Bank of England urges banks to strengthen reserves | Bank of England urges banks to strengthen reserves |
(40 minutes later) | |
Banks should build up their financial buffers to withstand the downturn and the dangers from the eurozone debt crisis, the Bank of England has said. | |
>Bank governor Sir Mervyn King said banks needed to boost capital buffers further because of the "exceptionally threatening" environment. | |
Sir Mervyn said that the Bank was making "contingency plans" in case of a break-up of the eurozone. | |
However, he said that he would not go into any details as to what these were. | |
The Bank's financial policy committee (FPC) said the eurozone debt crisis remained the biggest threat to the UK's banking system. | |
On Wednesday, six central banks, including the Bank of England, took action to encourage lending between banks in order to keep the economy moving. | |
Sir Mervyn added that the UK's banks were among the strongest in the world, with tier 1 capital ratios - an internationally respected measure of a bank's strength - at well above 12%. | |
That is higher than they were before the credit crisis began in 2008. | That is higher than they were before the credit crisis began in 2008. |
Dividends and bonuses | |
Sir Mervyn said one way for UK banks to gain further strength would be to raise money by issuing new shares. | |
The FPC also said that banks should keep lending, but should cut dividends and bonuses in order to help build up their financial reserves. | |
Some bankers argue that tighter capital requirement rules mean lower lending, as banks are forced to hang on to assets as a contingency, rather than pass it on to borrowers. | |
The chief executive of Royal Bank of Scotland, now part-owned by the UK government, said recently that strict regulation meant investors saw UK banks as a "dumb" place to invest, and that it limited their ability to lend. | |
The FPC is chaired by Sir Mervyn, and at present only has an advisory role. | |
Once the legal framework is in place, it is expected to become the country's top financial regulator from the start of 2013. |