Comment: Banks told not to strangle their lending firms

Flippancy notwithstanding, the sector may well feel it has got off lightly from the deliberations of the BoE’s financial policy committee (FPC), the body that monitors systemic risk.

In November, outgoing BoE governor Sir Mervyn King said a proper risk-weighting of assets, provisions for bad debts and mis-selling fines would have left Britain’s banks with a £50bn black hole in their balance sheets. Now, less than six months later, it is £25bn.

And £12.5bn of that has already been addressed by the banks via asset sales, bond issues, flotations and retained profits.

So what we are talking about is an aggregate figure of £12.5bn to be found, although no breakdown is available at the minute as to how much each bank – including partly taxpayer-owned Lloyds Banking Group and Royal Bank of Scotland – needs to raise.

That will come when the new Prudential Regulation Authority, which will monitor the financial strength of banks and insurers, holds talks with lenders over the next few weeks.

But the figure, crucially, looks do-able.

Of course, some fear that a further bolstering of bank balance sheets to make them Basel-compliant would risk shrinking lending to households and small businesses and stifling UK economic recovery.

And – while the FPC has specifically told banks and building societies with shortfalls to issue new capital or restructure their balance sheets in a way that doesn’t have this unwanted effect – the CBI warned that “it is difficult to see how this can be achieved in practice”.

Even so, perhaps there is some room to be sanguine here as well. There is much detailed and anecdotal evidence that, over the past few years, bank loans have been available but consumers and businesses have entered into the spirit of these austerity times by paying down debt, not taking more on.

Eight out of ten requests for loans from small and medium-sized businesses are said to be approved on average, for instance.

In short, what is effectively now a £12.5bn capital shortfall in Britain’s banks is something the country could have done without given the flat-lining economic backdrop.

But it is neither a bombshell or something that changes the essential underlying dynamics of the banking industry.

Hence the muted reaction of the banks’ share prices in the stock market yesterday.

Asia turns into a twin-edged sword for Pru UGH.

Just as Prudential has been seizing some of the high ground in the insurance sector, largely due to its thriving Asian arm, chief executive Tidjane Thiam gets a slapdown from the Financial Services Authority for events a few years back in that part of the world.

Alongside a £30 million fine, Thiam has been rapped for the Pru keeping the regulator in the dark about its abortive £23.4bn takeover of AIA, the Asian business of AIG, in 2010.

The FSA namechecks Thiam  specifically as it said the Pru “failed to deal with the FSA in an open and  co-operative manner”.

That star-crossed attempt at a deal continues to be a bane for Prudential.