The U.K.’s financial watchdog will intervene to prevent sudden surges of risky lending before they happen, the U.K.’s top banking regulator said.
The Prudential Regulatory Authority, which will take over from the Financial Services Authority in April as the U.K.’s banking supervisor, will “keep a very close eye on banks,” and require them “to have very clear lending policies,” Andrew Bailey, head of banking and insurance supervision at the FSA, said in a video interview on the Bank of England’s website.
“If there’s a spree of lending which looks like it’s being done to people or companies that we doubt could repay that lending, we’d aim to stop that before it happens,” said Bailey, who will also lead the new regulator.
Lending growth has remained slow despite the FSA relaxing guidance on how U.K. banks calculate liquidity and capital buffers, Bailey said in a speech in October. Earlier this year, the FSA relaxed the amount of funds U.K. banks must keep in reserve in an effort to spur lending and stimulate credit growth.