(Adds further comment)
By Huw Jones
LONDON, May 4 (Reuters) - Banks should have more than enough
available capital to back the expected volume of loans to help
companies bridge the coronavirus pandemic, Bank of England
Deputy Governor Sam Woods said on Monday.
The central bank has allowed lenders to tap 23 billion
pounds ($28.6 billion) of capital known as the countercyclical
capital buffer to support loans worth up to 190 billion pounds
as Britain heads for deep recession.
"It should be enough to accommodate even a pretty upper-end
estimate of what might be needed here," Woods told a City &
Financial webinar.
Royal Bank of Scotland Chairman Howard Davies told
the webinar that banks need more reassurance from regulators on
the amount of time they would be given to rebuild capital
buffers once the pandemic has passed.
"Without some reassurance about that, banks may be faced
with constraints on lending in the recovery phase, which could
be just the time you don't want those constraints," Davies said.
"That is something we need a further clarification on."
Regulators and the government have put in place lending
schemes and relief such as three-month mortgage payment holidays
to help people and businesses ride out the pandemic.
The BoE announced on Monday that it would allow banks to
exclude such loans from the calculation of their leverage ratio,
a broad measure of capital strength, as an incentive to continue
lending.
"No one knows quite how wide the chasm we are trying to work
across is right now," Christopher Woolard, interim CEO of the
Financial Conduct Authority (FCA), told the webinar.
He said the FCA has received more than 600 requests from
financial businesses for relief from rules of one kind or
another, with most granted.
"We have to be realistic that not every firm is going to
make the other side," Woolard said.
RBS Chairman Davies said that companies taking on the loans
will not recover at the same rate and some may not survive at
all, meaning discussions need to take place soon on how to exit
the "highly unusual schemes and highly unusual interventions".
"My verdict on the regulatory response to the crisis ... is
so far, so good, but perhaps we have done the easy bit and the
tough mechanism for regulating as we move into the recovery
phase has still to be resolved," Davies said.
Banks have already begun making large provisions for losses
on their loans, though Woods reiterated that lenders should take
into account mitigating factors such as government relief for
businesses during the pandemic.
Woods, who also heads the BoE's Prudential Regulation
Authority (PRA), said banks should still take a realistic view
on what might happen to loans but avoid an overly mechanical
adjustment.
Davies said the PRA has taken a "very sensible" approach to
provisions at banks during the pandemic.
($1 = 0.8041 pounds)
(Reporting by Huw Jones
Editing by Alex Richardson and David Goodman)
