MERVYN King yesterday came face to face with more than £200 billion worth of anger as Britain's banks vented their frustration over what they see as his failure to act decisively to ease the financial crisis.
The heads of the "big five" UK banks told the Governor of the Bank of England politely but emphatically yesterday afternoon that he should follow the example of the US and European regulators in taking swifter action to abate the effects of the credi
t crunch.
King was given the message at a meeting yesterday with senior banking figures including the chief executives of HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS – which together have a market capitalisation of £195bn.
The big five were joined by other major players in the City, including building societies and London-based US banks. , taking their total financial clout to well above £200 billion.
Last night, well-placed sources revealed that King and Sir John Geive, his deputy, had been told that the banks believed his stance did not compare favourably with that taken by US and European regulators.
The banks called on the BoE to follow the European Central Bank in offering to provide as much liquidity as necessary during the financial turmoil, and to be more flexible and responsive with its money operations, according to bank industry sources.
They argued that language linked to the use of "emergency" facilities meant there remained a stigma attached to accessing some funds, and banks should be allowed to use more collateral for borrowings and the duration of loans should be extended, they said.
The US Federal Reserve and European Central Bank had been quicker to respond to a deepening credit crisis, they maintained.
The Fed aided a bailout of investment bank Bear Stearns last weekend, making it clear its primary concern was maintaining stability, rather than controlling inflation – the latter being the Bank of England's central remit.
And the ECB has aggressively added extra liquidity, including an extra €15 billion to tide eurozone banks over the Easter holidayperiod.
Yesterday a Bank spokeswoman refused even to confirm any details of the meeting, including where it was happening or who was attending. However, it is understood that all the senior chief executives of all the "big five" were at the Threadneedle Street headquarters in London, including Sir Fred Goodwin of Royal Bank of Scotland and Andy Hornby of HBOS.
After the meeting the Bank issued a terse statement. It said: "Representatives of the UK banking industry met today with the Bank of England for a regular meeting to discuss current market conditions and the tripartite consultation document on financial stability and depositor protection.
"The Bank of England and the banks agreed to continue their close dialogue with the objective of restoring more orderly market conditions."
The meeting was held after the Bank announced that it had pumped an extra £5bn into frozen money markets – the second such move in three days, bringing the total funding available to £10.9bn. Even this failed to placate the financial institutions which had called for almost three times as much. The increased funds will be made available until the beginning of April.
The meeting between the BoE and the banks came as shares in HBOS, the UK's largest biggest mortgagte lender, almost recovered from the low they sank to on Wednesday after the ill-founded rumours about the Edinburgh-based institution's liquidity.
An investigation into the spreading of rumours about HBOS has been launched by the Financial Services Authority. and the Bank of England has denied that it has had to provide emergency funding
HBOS and other banks will this weekend get some respite, as the markets close for the Easter weekend. However, they are likely to come under further scrutiny when the markets re-open on Tuesday.
