Barclays says new watchdog targets could force lending cut

Fri Jun 28, 2013 1:16pm EDT
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By Steve Slater

LONDON (Reuters) - Barclays (BARC.L: Quote) warned on Friday it may have to cut lending if it is forced to act quickly to meet new financial targets imposed by regulators, but the Bank of England said it will not accept any plans that hurt lending.

The central bank's Prudential Regulation Authority (PRA) last week surprised investors by telling banks they needed to have a 3 percent leverage ratio, and said Barclays fell short with a ratio of only 2.5 percent after adjustments.

The ratio measures capital against total loans and some bankers argue it penalizes low-risk, high-volume businesses like trade finance and mortgage lending.

The PRA gave Barclays and mutual Nationwide, the only other major lender to fall short, until the end of July to say how they will improve.

Barclays Chief Executive Antony Jenkins said on Friday Barclays would achieve the target by 2015 under its existing plans.

"We have options to accelerate with minor income effects, but an aggressive acceleration requirement from the PRA would require additional actions," he said, adding that might include squeezing "lending to the UK and other economies, which is something we want to avoid."

That creates a dilemma for the regulator, which is trying to encourage banks to lend to revive economic growth. Barclays and Nationwide were the only two firms whose net UK lending was more than 1 billion pounds ($1.5 billion) in the first quarter.

A Bank of England spokeswoman said in a statement: "We have made it very clear that any plans that restrict lending to the economy will not be accepted."   Continued...

A woman sits in her mobility scooter outside a Barclays Bank in Leicester, central England April 24, 2013. REUTERS/Darren Staples