Top regulator wants banks to lend more to help economy

 
Tim Wallace
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MORE LENDING will help the economy and so help the financial system become more resilient, top regulator Andrew Bailey said yesterday, as he argued in favour of temporarily lower capital and liquidity requirements.

The head of the Prudential Business Unit and member of the Financial Policy Committee said that although he wants banks to keep raising capital levels to deal with any deterioration in the economy, it is even better for banks to increase lending now to provide a short-term boost to growth.

“Our view here is that a reduction in the risk arising from this new lending caused by an improvement in credit conditions should offset the risk from lowering capital buffers,” he told the Edinburgh Business School.

“If such extra lending boosts economic growth, it will enhance resilience in the financial system.”