LONDON (Reuters) -The Bank of England called on lenders on Friday to provide enough credit to companies to see them through the coronavirus crisis as the government closes its COVID emergency lending guarantee schemes.
"It is in banks’ collective interest to continue to support viable, productive businesses, rather than seek to defend capital ratios by cutting lending, which would have an adverse effect on the economy and therefore could have an even greater negative effect on banks’ capital ratios," the BoE said.
Britain's government is due to close emergency lending schemes to new applications this month.
The BoE's Financial Policy Committee said at the end of its March meeting that banks have large enough capital buffers to absorb "very big losses while continuing to lend".
Lenders should work "flexibly" with household borrowers as payment deferral schemes unwind, the FPC added in a summary of the meeting.
"The FPC expects banks to use all elements of capital buffers as necessary, to continue to support the economy through the recovery phase," the FPC said.
A countercyclical capital buffer for tapping during periods of market stresses is already set at 0%. The FPC said it would remain there until at least December, so any rise after that would not take effect until the end of 2022 at the earliest.
(Reporting by Huw JonesWriting by William Schomberg)