British bankers meet with BoE

Liquidity, rumour-mongering and housing market troubles top the list of subjects for discussion when Britain's top bankers meet…

Liquidity, rumour-mongering and housing market troubles top the list of subjects for discussion when Britain's top bankers meet senior officials from the Bank of England today.

They run the risk of talking into the Easter holidays such is their full agenda, as the banking industry, already facing its toughest period for over a decade, was rattled on Wednesday by speculation that a bank was facing liquidity problems.

HBOS, the country's biggest mortgage provider, bore the brunt of the chatter and its shares crashed 17 percent.

HBOS slammed the rumours and authorities joined in with an unprecedented public reaction. The BoE said no bank was in trouble and the Financial Services Authority warned it will hunt out people spreading "unfounded rumours".

READ MORE

The quick reaction from authorities showed investors remain jittery about banks, and also that authorities are more alert to worries than six months ago, when they were criticised for a slow reaction to a crisis at mortgage lender Northern Rock, since nationalised.

Britain's biggest bank sector victim so far is Northern Rock, also hit by a shortage of liquidity in financial markets, that remains at the heart of industry concerns as banks stop lending to each other.

How the BoE can lubricate the system and restore confidence will therefore dominate much of Thursday's meeting.

Chief executives or senior directors from the "Big 5" banks - HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS - are expected to meet BoE officials, including Governor Mervyn King, for a "regular exchange of views".

The meeting was only called last week, however, and little in banking at present can be considered routine. Details of the meeting have not been released.