Call to cut buffers by £90bn to lift growth

The lenders have been forced in the past to build up liquidity buffers of cash and government bonds far earlier than required under a globally-agreed timetable.

The buffers will cushion banks from short-term market shocks so they can keep operating for a month even if markets freeze as they did during the 2007-09 financial crisis.

Mr Carney, in his maiden speech, said it “will help to underpin the supply of credit, since every pound currently held in liquid assets is a pound that could be lent to the real economy”.

In a separate statement, the Prudential Regulation Authority, which supervises UK lenders, said banks can scale back their liquidity buffers on condition they have a minimum core capital ratio of 7 per cent, a new rider.

The watchdog has said it expects the lenders to meet this capital ratio by the end of the year.

The PRA is implementing a policy the Bank of England’s Financial Policy Committee decided on in June to allow the four biggest banks to scale back their liquidity buffers to 80 per cent of where they should be if in full compliance with the global Basel III accord. This would release £70bn but by extending the change to the eight main lenders, a further £20bn can potentially be released.

In his speech, Carney struck a more neutral tone towards banks than his predecessor Lord King.