Saturday, 29 June 2013

BoE softens rules for banks to give economy £70bn boost

By Philip Aldrick

Britain's banks have been given a £70bn shot in the arm to boost lending and aid the recovery after the Bank of England decided to relax its regulations to help growth.

The policy was disclosed in the Bank’s bi-annual Financial Stability Report, in which it also warned that households were facing risks from the “current low interest rate environment”. “A significant cohort of UK borrowers could experience financial difficulties if interest rates were to rise during a period of subdued income growth,” the report said. 

The UK’s big four lenders will be able to reduce their cash and cash-like assets by 20pc under the recommendation, made by the Bank’s Financial Policy Committee (FPC). The excess “liquidity” could then be used “to support lending to the real economy”, it said. The FPC estimated the impact of the rule change on the big four to be “around £70bn”.

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And read Patrick Barron's comment on the article here...

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