Friday, December 2, 2011

the Bank of England to demand increased dividend and moderation to help deal with "exceptionally threatening environment" posed by the crisis in the euro area


Britain need to limit bonuses and dividends to increase their financial strength to face the "exceptionally threatening environment" posed by the crisis in the euro area, according to the Bank of England, Mervyn King , Governor Sir.

In a clear recognition that it was difficult to predict the outcome of the crisis of sovereign debt in progress, the king admitted that he knew how much capital banks need to support the construction confidence and admitted that the credit crisis had begun in the single currency area.

the presentation of its annual health check through the financial system, King said that the characteristics of a "systemic crisis" and were visible and that the banks might even have to turn to their shareholders to raise more capital - even if they were already in compliance with all regulatory requirements.

Citing persistent threats to the financial system, admitted that he had asked banks to strengthen their financial strength -. Although it was already much stronger than its rivals in Europe

Speaking a day after central banks around the world was shocked financial markets with a commitment to allow banks to fund, King stressed that the authorities are preparing contingency plans for a break in the euro area. But he refused to reveal what plans might entail. "It is a unique event and none of us really knows," said the king.

The governor spoke in his capacity as chairman of the Financial Policy Committee, the body created by the coalition to sit inside the Bank of England and look for threats to the financial system . In his review of financial stability, the FPC said: "In light of exceptionally threatening the environment and the deteriorating outlook for bank profits, the committee believes that stronger measures are needed to build the resilience of British financial system. "

King said he did not believe that the banks did not sufficiently high levels of regulatory capital. "Rather, it reflects a view that is reasonable and desirable to reserve additional capital to improve the light fastness of the threats to financial stability continues in the UK, while at the same time improve the capacity of the banks to lend to the overall economy, "said the king.

Reflecting the fact that politicians can not be sure how much deeper the crisis could become the king said: "I think we can say how much capital is needed ... How much capital a bank must have the confidence of people willing to pay the bank, lend themselves to several years in order that the bank can lend money to businesses and homes? There is no simple answer to the question of how much capital banks must keep their [funders] trust. "

But on the question of how banks may seek to restrict bonuses, Hector Sants, chief executive of the Financial Services Authority - who also sits on the FPC - admitted he had no direct power to prevent banks pay premiums.

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