New guidance from the PRA saidliquidity buffers - cash and short-term bonds banks are required to hold - can be used without fear of future sanctions.
The Prudential Regulation Authority (PRA) has said it expects banks to focus on continuing to support customers, even if that means using their liquidity buffers.
New guidance from the PRA saidliquidity buffers - cash and short-term bonds banks are required to hold - can be used without fear of future sanctions.
The PRA said: "During this time of COVID-19 related disruption to the economy, the PRA expects banks to focus on continuing to service and support their customers and clients.
"Banks are expected to use their liquidity buffers in doing so, even if it means LCR ratios go significantly below 100%. the PRA said in guidance to lenders."
Banks have faced criticism over their handling of the Coronavirus Business Interruption Loan Scheme (CBILS) and are under pressure from both the government and regulators to support struggling firms.
The PRA added:“A reduction in the LCR ratio, including below 100%, in and of itself will not trigger any automatic restrictions.”
The regulator also said it would give lenders sufficient time after the crisis to replenish their liquidity and capital buffers.
