LONDON -- The Bank of England in September considered, but shied
away from, relaxing tough new rules governing banks' balance sheets
in an effort to spur lending.
Minutes published Monday of the Sept. 20 meeting of the BOE's
Financial Policy Committee showed policy makers discussed whether
banks' capital or liquidity ratios should be loosened to support
the supply of credit to the wider economy--although they ultimately
judged such a move "inappropriate" at the current time.
Relaxing capital or liquidity requirements could spook investors
and may not lead to more lending, committee members said.
Instead, the committee recommended banks do whatever they can to
bolster their capital and liquidity buffers to shield them from
further shocks.
The committee said "severe strains" in financial markets caused
by the euro-zone sovereign debt crisis were making it harder for
banks to raise funds.
Although less directly exposed to troubled euro-zone nations
than their European counterparts, U.K. banks could face problems if
those lenders ran into trouble, the committee said.
The FPC was set up in an overhaul of U.K. financial regulation.
It is charged with ensuring financial stability, and currently has
an advisory role pending the passage of legislation granting in
full powers in 2013.
-By Jason Douglas and Geoffrey T. Smith;
jason.douglas@dowjones.com; +44 (0) 20 7842 9272