UK Markets close in 6 hrs 54 mins
  • FTSE 100

    6,435.10
    +2.93 (+0.05%)
     
  • FTSE 250

    19,670.23
    -119.33 (-0.60%)
     
  • AIM

    1,032.36
    +0.60 (+0.06%)
     
  • GBP/EUR

    1.1211
    -0.0020 (-0.18%)
     
  • GBP/USD

    1.3338
    -0.0020 (-0.1507%)
     
  • BTC-GBP

    14,325.16
    +215.93 (+1.53%)
     
  • CMC Crypto 200

    378.87
    +9.12 (+2.47%)
     
  • S&P 500

    3,635.41
    +57.82 (+1.62%)
     
  • DOW

    30,046.24
    +454.97 (+1.54%)
     
  • CRUDE OIL

    45.26
    +0.35 (+0.78%)
     
  • GOLD FUTURES

    1,809.00
    +4.40 (+0.24%)
     
  • NIKKEI 225

    26,296.86
    +131.27 (+0.50%)
     
  • HANG SENG

    26,669.75
    +81.55 (+0.31%)
     
  • DAX

    13,292.09
    -0.35 (-0.00%)
     
  • CAC 40

    5,571.55
    +13.13 (+0.24%)
     

COVID bank loan demand should ease in coming months, says Bank of England

Huw Jones
·1-min read
A pigeon stands in front of the Bank of England in London
A pigeon stands in front of the Bank of England in London

By Huw Jones

LONDON (Reuters) - Demand in Britain for corporate credit to survive the COVID-19 pandemic should ease when government-backed loan schemes start winding down later this year, a senior Bank of England official said on Friday.

Businesses have raised over 70 billion pounds of net additional financing from banks since March, most of that through government-backed loan guarantee schemes.

"Once those schemes stop we will really test banks' lending appetite," Alex Brazier, the BoE's executive director for financial stability, told a BoE online event.

"Hopefully by the time those schemes begin to roll off, we will see credit demand begin to ease," he said, adding that the focus would then switch to companies raising new equity on markets to grow and to reduce debt.

Provisions for losses on loans across Britain's five main banks have already reached $22 billion.

"Markets are expecting them to take about 50 billion pounds of losses, and they can comfortably absorb those in their buffers of capital that they hold, so they don't need to cut back on lending," Brazier said.

Parts of the financial market became dysfunctional in March when the pandemic lockdown began, Brazier said.

Money market funds across the world saw big outflows during a "dash for cash" that could have become worse had central banks not stepped in to buy bonds to ease the strain, he said.

"We haven't forgotten that and we are working with other central banks and with market regulators around the world, because it was a global issue, to fully understand what happened and to try and put reforms together to try and stop it from happening again."

(Reporting by Huw Jones)