Financial Policy Committee tells banks to raise capital ASAP – MoneyWeek

Financial Policy Committee tells banks to raise capital ASAP – MoneyWeek

Financial Policy Committee tells banks to raise capital ASAP – MoneyWeek

Immediatefinancialmarkettensionshavesubsidedsomewhat,buttheoveralloutlookforfinancialstabilityremainsfragile,theFPCsaid。

ItacknoweledgedthatbankshavemadesomeprogressontheCommitteesthreerecomendationsfromitsNovember2011meeting,butsaiditremainsconcerned。

The11membersoftheFPCarrivedattheirdecisionduringameetingheldonMarch16th,andsaidtheycouldmakeareviewofthebanksprogressattheirnextmeetinginJune。

TheCommitteealsosaidthattheoutlookforfinancialstabilityhadimprovedintheneartermandthatimprovementsattheEuropeanCentralBankhadhadapositivespilloverforUKbanks。

CreditdefaultswapspremiaforthefivelargestUKbankshadfallenfromaround240basispoints(2。

4percentagepoints)to190basispointsonaverageandtheirequitypriceshadrisenbyaround35%onaveragesincethefirstlong-termrefinancingoperationinlateDecember。

UKbankstermdebtissuancehadalsobeenstrongsincethestartoftheyear,includingissuanceinunsecuredmarketsthathadpreviouslybeenclosedtosomebanks,theFPCsaid。

However,thereportemphasisedthatconditionsremainedfragile。

WhiletheECBsoperationshadalleviatedsomeoftheimmediatetensions,questionsremainedabouttheindebtednessandcompetitivenessofsomeEuropeancountries。

Bankswithlargeexposurestothosecountrieswhererisksofpersistentloweconomicgrowthandpotentialcreditdefaultsremainedhighshouldbeparticularlyalerttotheneedtobuildcapital。

NextyeartheCommitteewillgainnewpowersthatwillenableittoforcebankstotakeactiontoreducetheriskssurroundingthefinancialsystemasawhole。

TheFPChascalledforpowerstoallowittoorderbankstoincreaseordecreasecapitalbufferstostabilisecreditsupplyandtobeabletoaltertheoverallleveragerationofbankstodeterminetheamounttheycanlend。

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