{"id":30546,"date":"2012-06-29T08:25:00","date_gmt":"2012-06-29T12:25:00","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/06\/uk-banks-should-boost-capital-during-eu-crises-boe\/"},"modified":"2012-06-29T08:25:00","modified_gmt":"2012-06-29T12:25:00","slug":"uk-banks-should-boost-capital-during-eu-crises-boe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/06\/29\/uk-banks-should-boost-capital-during-eu-crises-boe\/","title":{"rendered":"UK banks should boost capital during EU crises – BOE"},"content":{"rendered":"

By Central Bank News
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    UK banks should continue to limit dividends and executive compensation and instead use the funds to boost their capital cushion to absorb any possible losses during the current risk to financial stability from the crises in the euro area, the governor of the Bank of England said.<\/span><\/div>\n
    <\/span>In his prepared remarks for a press conference, Mervyn King said the cushion that banks should build up may even be larger than the current planned increase toward meeting the tougher Basel III capital requirements.<\/o:p><\/span><\/div>\n
    <\/span>\u201cThe Committee continues to believe that there is a need for banks temporarily to raise their levels of capital, in view of the exceptional threats they currently face,\u201d King said presenting the bank\u2019s Financial Stability Report.<\/o:p><\/span><\/div>\n
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    That additional capital cushion should be used in the event that losses actually occur so banks don\u2019t end up cutting back lending to consumers and businesses to cover the losses.<\/o:p><\/span><\/div>\n
    <\/span>\u201cAt that point, or if the current risks recede, banks\u2019 capital ratios could then fall back to the official transition path to the Basel III standards,\u201d King said, rejecting arguments that increasing the capital cushion would limit banks\u2019 capacity to lend.<\/o:p><\/span><\/div>\n
    <\/span>\u201cMore capital and more lending go together,\u201d King said. \u201cMoreover, in the event that large losses are realised as a result of the euro-area crisis, it is vital that our banks are sufficiently well capitalised to be able to continue to provide the services on which we all rely.\u201d<\/o:p><\/span><\/div>\n
    <\/span>UK banks have been building up their liquidity buffers in recent years and they are now above official guidance levels. In addition, the banks can access liquid funds through the bank, specifically through the BOE\u2019s recently-extended extended repo facility and its discount window, King said.<\/o:p><\/span><\/div>\n
    <\/span>\u201cThat has put banks in a strong position to withstand a period of market stress. But it is important that banks are willing to make use of their liquid asset buffers in times of stress, in order to support lending to the real economy,” King said<\/span><\/div>\n
    <\/span>The Financial Stability Report was prepared by the BOE\u2019s Financial Policy Committee (FPC), set up last year to reduce systemic risks to the UK financial system. The creation of the FPC was part of the UK\u2019s wholesale reform of financial regulation, which gave  <\/span>power to the bank\u2019s FPC to address overall financial stability. It also set up a new Prudential Regulatory Authority at the BOE that would focus on systemically-important financial institutions.<\/span><\/div>\n

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    www.CentralBankNews.info<\/span><\/div>\n
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By Central Bank News     UK banks should continue to limit dividends and executive compensation and instead use the funds to boost their capital cushion to absorb any possible losses during the current risk to financial stability from the crises in the euro area, the governor of the Bank of England said.     In … <\/p>\n

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