Bank chiefs to warn Barclays over lending

BANK of England bosses are expected to warn Barclays against cutting lending to consumers and businesses when they appear in front of the Treasury select committee tomorrow.

The central bank is concerned by comments made last week by Barclays chief executive Antony Jenkins that the business could be forced to cut lending to the public if his company is required to improve its leverage ratio at short notice.

“We have made it very clear that any plans that restrict lending to the economy will not be accepted,” the Bank of England said yesterday.

But Barclays is understood to be exasperated by the unexpected leverage ratio demands issued by the central bank’s Prudential Regulatory Authority at the end of last month.

As a result of the policy – one of the final acts of former governor Sir Mervyn King – institutions were required to declare their progress towards holding capital worth three per cent of all the loans have issued.

When the PRA told banks they needed to have a three per cent leverage ratio, it also said Barclays fell short with a ratio of only 2.5 per cent after adjustments. Any move to enforce a higher ratio could be politically toxic since cutting lending to the public – and potentially damaging any economic revival – is one of the few options available to Barclays if the Bank of England insisted on immediate action.