LONDON (MNI) – Market perceptions of the threat from the euro zone
have eased in recent months, the Bank of England’s interim Financial
Policy Committee noted in the minutes for its Sept. 14 meeting.
“The Committee noted that market perceptions of the near term
probability of acute stress in the euro area had fallen somewhat, not
least following recent policy announcements by the European Central
Bank.”
“The improvement in market sentiment had also reduced perceptions
of risks to UK banks,” the minutes continue.
But the committee cautioned that “undelying concerns” about
sovereign debt and the strength of banks persisted.
“…Data suggested a weaker outlook for activity, both domestically
and in a range of key markets for UK banks internationally”.
While UK banks had made progress on reducing exposure to the most
vulnerable euro zone economies, these still “remained large” – at an
average of 70% of UK banks’ core Tier 1 capital.
The FPC cited the particular challenges at the current juncture of
strengthening capital while at the same improving credit availability.
The job of the FPC would have been easier if banks had already
built up a counter-cyclical capital buffer in lie with the incoming
Basel III regime. As it was banks had to raise capital to meet the
requirements of the new regime while at the same being called on to
boost lending.
-London newsroom: Tel+44 207 862 7492; email: dthomas@mni-news.com
[TOPICS: M$$BE$,MT$$$$]
