Bank of England takes action over bad debts

The pound surged past a two-week high against the US dollar Wednesday after Bank of England Governor Mark Carney hinted that some of the Bank's stimulus may be pared back if the British economy were to improve.

In a press conference on Tuesday, the Bank Governor Mark Carney explained that the Bank of England was anxious about consumer credit expansion and announced measures to shield the UK's economy.

He said the strengthening global economy and the United Kingdom competitiveness following the fall in sterling is creating the "possibility of a self-reinforcing revival in investment".

The Bank of England plans to increase capital requirements for United Kingdom lenders by 11.4 billion pounds ($14.5 billion) to tackle risks posed by the recent rapid growth in consumer credit and prepare for the uncertain outcome of Brexit talks.

Speaking at a European Central Bank conference in Portugal, Carney said policymakers would need to look at the extent to which stronger business investment offset a slowdown in consumption, as well as growth in wages and labour costs.

"Right now in the United Kingdom, output is approaching potential and the capital overhang looks set to be eliminated over the next few years", says Carney.

The bank shouldn't "overburden" monetary policy with rules that could restrict the kind of bonds that are included in a quantitative easing program to bolster the economy, Carney said in an interview with Bloomberg television on Thursday.

The ease with which individual institutions could potentially be hacked has come into focus in recent weeks after an email prankster targeted several bank chiefs and even the governor of the central bank itself. This previously fell, so a major rise in dairy prices may be needed to restore NZD exchange rates.

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ING economist James Knightley said that while Carney's comments did not suggest a rate rise was a "done deal", the MPC's August meeting was now "in play for a rate rise".

"They have been wrong for eight years about this and now they are going to be right?"

"Absent a material change in the outlook", the central bank will increase the level again to 1 per cent in November.

It adds to evidence of a split between the BoE's Monetary Policy Committee members on whether to hike rates.

The increase to 0.5% will raise regulatory buffers of common equity Tier 1 capital (the highest quality capital) by £5.7 billion, according to the FPC.

The Pound would typically be expected to benefit if the Bank increased interest rates as higher rates attract more global capital.

The FTSE 100 Index was down 46.56 points at 7,387.8, with multi-national stocks feeling the heat as sterling surged 1% against the United States dollar at 1.294.

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