Bank lobby preached to the converted in liquidity talks

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By Huw Jones and Lionel Laurent

LONDON/PARIS, Jan 21 (Reuters) - Lobbyists found themselves preaching to the converted: the European Central Bank and Bank of England needed little persuading in the end that new global liquidity rules for commercial banks needed loosening.

Central bankers realised they had to relent unless they wanted to remain cash machines for squeezed European lenders indefinitely, said sources close to negotiations on the rules.

Earlier this month, commercial banks got their way after a campaign whose subtlety contrasted to past aggressive and unsuccessful lobbying efforts.

Global regulators gave them four more years and greater flexibility to build up sufficient liquid reserves - those that can be sold quickly for cash even during crises - so that taxpayers would no longer have to fund rescues like in 2007-09.

"What helped the ECB and Bank of England rally to European banks' cause was the realisation that liquidity deficits were a central bank issue," said a banking source close to the talks.

"The change in their minds happened around the middle of last year," said the source, who declined to be named because he was not authorised to speak publicly about the talks.