Banking analysts to meet FSA next week

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The Independent Online

The Financial Services Authority has invited banking analysts to a meeting on Monday to explain its capital ratio requirements and liquidity criteria for banks, as it seeks to avert confusion on comments it made last week when the government announced a second banking bailout.

The City watchdog said last week that the capital ratios it demanded of the banks in October's sector bailout – about 8 per cent for "tier one" capital – were not set in stone as new minimums, and added that tier one ratios could fall to between 6 and 7 per cent.

But some banking analysts have caused concern among investors by attacking lenders whose capital ratios appeared light compared with the apparent new benchmark of 8 per cent, raising fears that they would need to raise more funds. This has prompted the meeting at which the FSA will attempt to calm analyst fears about liquidity among such banks and reduce any market volatility in bank shares that may be linked to misunderstanding of its guidelines.

"We are holding a meeting with analysts next week to answer any of their questions and discuss capital ratios with them," said a spokeswoman for the FSA.

The fear is that such analyst reports are one reason banks are reluctant to lend.

The Governor of the Bank of England has voiced his frustration at banks hoarding capital and not lending to businesses and households because they fear being punished for reduced ratios. The Government has repeatedly said it wants the banks to lend to prevent the recession bankrupting otherwise healthy businesses.