–Confident FSA Will Back Cuts In Regulatory Liquidity Buffers

LONDON (MNI) – UK Chancellor of the Exchequer George Osborne
announced today that his funding for lending plan had cleared EU
Commission state aid rules, taking the scheme a step nearer
implementation.

“I can also confirm that today we have received EU state aid
approval to extend the scheme (the National Loan Guarantee Scheme) to
medium-sized businesses with a turnover of up to stg 250 million, that
means 99.9% of UK businesses can now benefit,” Osborne said.

Osborne also welcomed the action taken by the Bank of England’s
decision to launch a series of repo auctions to ensure the banks would
have access to as much liquidity as they might need in the face of an
intensifying euro zone crisis.

Osborne also seemed confident that the Financial Services
Authority would back the plan to reduce regulatory liquidity buffers at
the banks – another pillar of the government’s plan to insulate the
economy from the euro zone crisis.

“Of course the Financial Services Authority has to make its own
independent decisions but they will have paid, I’m sure, close attention
to my speech and that of the governor of the bank at the Mansion House”.

Osborne also noted that the BOE’s Financial Policy Committee had a
mandate to set its macroprudential policies in a symmetric way – so that
liquidity and capital requirements on banks would be eased at a time of
slowing or contracting growth.

Fiscal credibility allowed the BOE to pursue a highly accommodative
monetary policy, including unconventional monetary policies, such as QE.

“The most recent assessment by the IMF of the UK economy explicitly
looked at unconventional monetary policy tools that are being used at
the moment and came to the conclusion that it was having a positive
impact… we are able to pursue loose monetary policy, we are able to
use all the tools available to us on the monetary policy side precisely
because we have international credibility on the fiscal side”.

–London Bureau; tel: +442078627492; email: ukeditorial@marketnews.com

[TOPICS: MABDS$,M$B$$$]