Andrew Haldane, the Bank of England’s executive director for financial stability, said banks should shore up their capital as market conditions improve.
“Our message to the banks this week was to build their defenses,” Haldane said in an interview with Sky News today. “It’s not true to say that some banks at least couldn’t raise external funds to buttress their seawalls. The financial markets are somewhat better than a few months ago and the European situation has normalized to a degree.”
Haldane said that the Financial Policy Committee recognized banking bonuses had already been cut “somewhat,” though banks need to focus on building up capital buffers for extra protection. The committee on March 23 said the outlook for financial stability remains “fragile,” as it made a recommendation to the government on the tools it needs to help strengthen banks.
“The world remains a risky place,” Haldane told Sky. “If you are to put in place some extra protection now, the capital markets will reward you.”
Haldane also said the European Central Bank’s measures to provide loans to banks haven’t replaced the need for structural reforms.
“What the ECB has done is provided liquidity to buy time” while structural reforms are carried out, he said. “As a solution, it’s a sticking plaster.”
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