Banks 'need to strengthen their balance sheets'

Executives in banking jobs have been told their companies must take advantage of the currently favourable market conditions to further reduce their leverage.

The advice came in the Bank of England's latest bi-annual Financial Stability report, which stated that the UK's financial system is considerably more stable now than it was six months ago.

But those in banking jobs were warned that financial institutions need to be ready for the withdrawal of government support for the sector.

"While their profitability is relatively buoyant and market conditions broadly favourable, banks should take opportunities to strengthen their balance sheets, including by not distributing an excessive amount of profit," the report stated.

It added that carrying out these measures now will lower potential disruptions to the flow of credit in the future.

Earlier this week, Professor David Miles, a member of the Bank of England's Monetary Policy Committee, warned those in banking jobs that their market may get smaller as a result of banks being required to hold more capital and reliably liquid assets.

Updated: 21 December 2009.
Categories: banking-and-financial-services, market-and-industry-news.