Bank chiefs ordered: keep on lending

Bank of England acts to keep economy moving

BrItIsh banks have been told they must keep lending to drive the economy after the chaos that followed the Brexit vote.

the Bank of england summoned the chief executives of the nation’s biggest lenders to crunch talks where it urged them to carry on giving businesses the cash they need to prosper.

It aims to prevent a repeat of the credit crunch which followed the meltdown of Northern rock in 2007 and collapse of Us giant lehman Brothers in 2008, when customers were unable to access vital funds.

this led to a lending shortage which deepened the recession and delayed the recovery.

the crunch talks in the heart of the City came on a dramatic day in which the blue chip Ftse 100 index made up its postreferendum losses and the pound rallied against the dollar to around $1.35.

But despite this wider recovery, bank share prices are still down around 12pc – and lloyds, Barclays and Natwest owner royal Bank of scotland have all lost more than a fifth of their quoted value.

the trio’s chief executives were yesterday joined by those of hsBC, asia-focused standard Chartered and others including Nationwide and tsB to discuss shoring up the economy.

Officials at the Bank of england told bosses emergency cash was available if needed to get them through the immediate aftermath of the Brexit vote, according to the Financial times.

and they stressed that it was now important to carry on lending rather than freezing up.

Governor Mark Carney is understood to have made an appearance but the session was chaired by another official.

Carney – who appeared on live television to reassure the nation on Friday following the outcome of the vote – is set to make a speech this afternoon in which he will lay out a response to Brexit.

the Bank is widely expected to cut interest rates from their current record low of 0.5pc, possibly as soon as next month.

this will make borrowing even cheaper than it already is and act as an economic stimulus but could drive up inflation – particu- larly after last week’s sharp fall in the value of the pound.

Meanwhile, the City is preparing to defend its interests in a fight to preserve access to europe’s single market.

this effort is being spearheaded by santander chairman Baroness shriti Vadera, a business minister during the 2008 crisis. london Mayor sadiq Khan has also offered his support by demanding access and calling for the capital to be given more powers by Westminster.

he has appointed multi-millionaire rajesh agrawal, the founder of currency firms rationalFX and Xendpay, to spearhead these efforts as deputy mayor for business. the City is particularly keen to retain the passporting rights which allow British-based banks to sell services in other eU countries.

this is likely to prove controversial as eU leaders including German Chancellor angela Merkel have insisted the pay-off must be accepting freedom of movement – meaning immigration levels would remain outside British control.

Bosses are also anxious to preserve london’s status as a hub for trading in euros, something challenged by French President Francois hollande today.

he argued this could only continue if free movement was allowed.

In a turbulent day, rumours swirled that american banks Goldman sachs and Morgan stanley had pre-rented office space in Frankfurt in case they had to make a rapid move. the claims were quickly denied by both.

Meanwhile, some sought to pour oil on troubled waters.

IG market analyst Joshua Mahony said there was ‘a confidence within the City that perhaps the implications to this vote may not be as immediate nor far-reaching as many initially thought’.