UK banks 'should be allowed to take risks'

19 August 2011

Banks in the UK should be able to take greater risks in an effort to boost the nation's economic recovery in the aftermath of the recession.

This is the opinion of Andrew Haldane, executive director of financial stability at the Bank of England - which was founded in 1694 and is sometimes referred to as the Old Lady of Threadneedle Street - who noted lenders are currently suffering from acute risk aversion following over-reaction across the sector.

The industry figure explained this movement has served to force the cost of credit upwards and "may be retarding the recovery" as a result.

He observed banks should pay smaller dividends to shareholders in an effort to meet capital requirements, adding: "The Financial Policy Committee, like the Monetary Policy Committee, needs to act ... in response to these developments."

The job of the body is not only to halt rises in credit and debt, but also to cushion the fall, Mr Haldane suggested.

By Asim Shah

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