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By Huw Jones
LONDON, Aug 7 (Reuters) - Demand in Britain for corporate
credit to survive the COVID-19 pandemic should ease when
government-backed loan schemes start winding down later this
year, a senior Bank of England official said on Friday.
Businesses have raised over 70 billion pounds ($91.07
billion) of net additional financing from banks since March,
most of that through government-backed loan guarantee schemes.
"Once those schemes stop we will really test banks' lending
appetite," Alex Brazier, the BoE's executive director for
financial stability, told a BoE online event.
"Hopefully by the time those schemes begin to roll off, we
will see credit demand begin to ease," he said, adding that the
focus would then switch to companies raising new equity on
markets to grow and to reduce debt.
Provisions for losses on loans across Britain's five main
banks have already reached $22 billion.
"Markets are expecting them to take about 50 billion pounds
of losses, and they can comfortably absorb those in their
buffers of capital that they hold, so they don't need to cut
back on lending," Brazier said.
Parts of the financial market became dysfunctional in March
when the pandemic lockdown began, Brazier said.
Money market funds across the world saw big outflows during
a "dash for cash" that could have become worse had central banks
not stepped in to buy bonds to ease the strain, he said.
"We haven't forgotten that and we are working with other
central banks and with market regulators around the world,
because it was a global issue, to fully understand what happened
and to try and put reforms together to try and stop it from
happening again."
($1 = 0.7686 pounds)
(Reporting by Huw Jones)
