Banks 'must save cash in good times'

HSBC chief executive Stephen Green today urged world leaders to restrain bank lending during economic booms and save cash for downturns.

Green said regulators should insist banks build up reserves in the good years, but be able to relax rules during times of distress. He added that it was vital rules were introduced to influence the supply of credit in good times and bad.

The call came a week before the leaders of the G20 nations meet in London to discuss a way out of the financial crisis.

Green said: "Banking authorities need to have a mechanism to be able to adjust bank capital ratios so that they are required to have higher capital ratios in good times and perhaps lower ratios when the economic environment worsens."

The view echoed that of Financial Services Authority chairman Lord Turner, who last week proposed such powers in his report on the future of regulation.