UK banks 'paying more to raise bonds capital'

5 December 2011

British banks are being forced to pay more money to raise worthwhile capital in traditional bond markets.

That is according to Andrew Haldane, director of financial stability at the Bank of England (BoE), who has told the Financial Times this is one of the primary reasons financiers are struggling to achieve strong balance sheets in the wake of the recession.

Mr Haldane explained that bonds are becoming an increasingly difficult investment area for lenders, while the growing demand for collateral from other banks is also serving to undermine their attempts at recovery.

Following on from the global downturn, financiers are having to secure more of their loans against collateral due to the loss of trust in them and Mr Haldane indicated this trend is set to continue in 2012.

Recently, governor of the BoE Mervyn King advised lenders to boost their capital holdings to protect themselves against the possible collapse of the eurozone.

By Asim Shah

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