"The UK is over its experiment of combining fiscal and monetary austerity," sentenced analysts at Swiss broker UBS this morning.

So much so in fact that in their opinion the incoming Bank of England governor's openness to monetary policy innovation may not even need to be tested if, as they expect, banks return to lending.

Key to the above is the fact that a belated shift in the regulatory agenda is on the cards while new business margins are high.

As well, the above is both timely and opportune as lenders balance sheets are now fixed. To this effect, they believe that the recent spate of debt buybacks illustrates how far the system has come.

Of great importance, and perhaps underappreciated, "an effective loosening of monetary policy through cheaper mortgages with less onerous deposits is at hand," they point out.

Furthermore, the loosening of Basel liquidity rules announced on January 6th further improves banks' [debt] issuance calendar they say - gross issuance could be down by more than 80% compared with 2011.

"Some reduction in required mortgage deposits would unblock a housing market where renting has become substantially more expensive than buying," they conclude.

For all of the above reasons they have revised their price target on Lloyds to 60p (from 50p) that for Barclays to 315p (from 255p) and RBS to 410p.

AB

Related share prices
Barclays (BARC) share price
Lloyds Banking Group (LLOY) share price
Royal Bank of Scotland Group (RBS) share price