British banks plan to make fewer loans to consumers and companies in the first quarter, threatening to deepen the economic slowdown.

Banks curbed secured credit for households "materially" and cut debt to companies "significantly" in the past three months, the Bank of England said yesterday.

Spreads on secured lending and corporate credit rose in the past quarter and will increase further in the next three months, the bank's survey found. Lenders reported a "material reduction" in credit availability to the commercial real estate industry, the bank added.

It also emerged yesterday that the UK's financial regulator is to be given sweeping powers to intervene in failing banks, as part of a banking code shake-up aimed at avoiding a repeat of the crisis that engulfed Northern Rock.

Chancellor Alistair Darling said the new powers - which echo those in the US - would allow the regulator to seize and protect depositors' cash when a bank got into serious difficulty, heading off the risk of a run on the bank.

- ( Financial Timesservice / Bloomberg)