Chief economist at currency trading firm World First, Jeremy Cook, agrees that Mark Carney is likely to relax capital rules today, following the Brexit vote. But he is also pessimistic that banks might not lend more to customers because, he says, “Mark Carney’s Bank of England is expected to flex the muscles of their newest counter-cyclical capital buffer today and lower the levels of capital banks are forced to hold in their coffers.
This should allow banks to increase the volume of loans they’re extending to the private sector as they look to put the capital to work which, in turn, supports the credit markets and small businesses reliant on bank funding. However, history isn’t particularly supportive of this theory.
Mervyn King’s Bank of England had a torrid time trying to get UK banks to issue credit for one key reason – the demand for loans simply wasn’t there. In times of political and economic uncertainty, appetite for credit among SMEs falls through the floor, and understandably so”.