While the ability of some smaller banks to lend is restricted by the loan-to-deposit ratio regulations, sluggish credit expansion was not primarily a result of liquidity constraints, Barclays analysts said.
Austria's central bank has said that Austrian bank subsidiaries in central and eastern Europe should not exceed a loan-to-deposit ratio of 110%, a way of ensuring that their funding needs do not make too great a call on resources back at headquarters.
But Mr. Osborne may wonder why Mr. King is saying this now, as RBS nears the end of a five-year restructuring that has seen it cut its balance sheet almost in half and reduce its loan to deposit ratio to a healthy 100%.