On Wednesday, the Bank of England announced that it would reduce liquidity requirements for the major banks and building societies that had met the minimum 7% capital threshold.
Grant Thornton financial advisory services partner Ewen Fleming said: “This will potentially provide an additional supply of capital but actually getting that out in the marketplace to those who are not currently getting access to lending will be difficult. This is due to the risk profile the lender wants and whether banks want to go to the cusp or keep a cushion back for themselves.”
While the Prudential Regulation Authority monitors lenders’ capital thresholds, Fleming said other regulators such as the Financial Conduct Authority could also have an impact on banks’ appetites to lend: “The Financial Conduct Authority is all about protecting customers and part of that may be that banks will have to reduce their margins. And if banks make less profit, they have less capital.
“The Mortgage Market Review is a great example of the principles of conduct risk which the FCA is promoting and which is very costly to lenders.”
In July, Business minister Vince Cable denounced the Bank of England’s regulators as “capital Taliban” placing unnecessary obstacles in the way of banks which were willing to lend.
