Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

Bank of England Governor Mark Carney fired a warning shot at U.K. banks on Thursday as officials cut the benchmark rate to a record-low 0.25 percent. He said they had "no excuse" not to pass it along to borrowers. Here's how we imagine banks might report back to him at the end of the year.

Dear Governor Carney,

In August, you were really hard on us. You pretty much said we had to pass along that rate cut, and even set up a brand new Term Funding Scheme to get us to push it through, and penalties if we didn't.  

Well, it's December, and we just want to say: Sorry. We tried.

It's not our fault! Don't believe us? Just look at your own credit conditions survey from the second quarter of 2016. We loosened lending criteria and credit scoring, we cut fees and commissions and we ramped up supply -- aside from that icky commercial real estate sector -- yet that still failed to change the mood for businesses or would-be homebuyers. And all that was pre-Brexit. We were totally there, willing to lend.

Fading Mortgage Loan Demand
The BOE's pre-Brexit credit survey showed households were already cooling on arranging mortgages
Source: Bank of England Credit Conditions Survey
The BOE conducted its survey of banks from May 23, 2016 to June 10, 2016. The figures show the net percentage balance, which weighs responses according to market share. A positive number indicates demand increased from the previous month, a negative number indicates it weakened.

The problem is our customers. After Brexit, they just weren't interested. Our lending growth is going nowhere, and we thought you should know.

Look, as you well know, there were other forces at work. You were right to cut your growth outlook, given that nasty contraction in the purchasing manager surveys in July and the nosedive in consumer confidence.

Wary Businesses
The second quarter saw a big drop in large companies' demand for loans, while demand at other businesses showed a recovery, but not a spectacular one
Source: Bank of England Credit Conditions Survey

But all that uncertainty meant the promise of a cheaper mortgage or factory loan wasn't enough to light a fire under lending demand. Wage growth was hardly going gangbusters, even with an ultra-low jobless rate, and that was enough for our phones to stop ringing.

Worried Consumers
Confidence utterly evaporated after the Brexit vote
Source: Bloomberg

And if you're going to start warning that unemployment's headed up and say there's a lot of uncertainty about, that's hardly going to get people to want to load up on debt. 

And before you accuse us of taking cheap cash and fixing our own balance-sheet problems first before helping our customers, take a good look at those EU stress tests -- we came out with a clean bill of health! There's no sign of a Monte Paschi on these shores, Governor. If you're willing to allow HSBC to spend $2.5 billion on buying back shares, surely you can't claim that we were in any sort of pressing need to keep cash under the mattress.

As much as we'd like to, there's not really anything we can do about getting customers to want to borrow more, unless you want us to go back to all that no-deposit, super high loan-to-value ratio type stuff we were doing before the crisis. But we're sure you don't want that. And if we're being honest, that quarter-point cut was probably the most you could have done for consumer confidence. Like we say, there are larger forces at work. 

Anyway, fair's fair. For those of us that failed to increase net lending, we're prepared to pay that penalty -- at 25 basis points it's not exactly fatal. We can take it. But you might think about making the TFS terms more agreeable, as we review just how much capital we really want to allocate to this country. 

Merry Christmas!


P.S. You know, you could just call the Treasury and ask them for some fiscal stimulus. Just a thought. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lionel Laurent in London at

To contact the editor responsible for this story:
Jennifer Ryan at