Banks Warned to Increase Lending

Banks have been warned - more lending to small and medium sized businesses.

Banks have been warned – more lending to small and medium sized businesses.

David Cameron has stressed once again that banks are not lending enough to firms.  He expressed on Tuesday in a town hall meeting that banks must lend more to boost economic recovery.  He said government was looking at a variety of proposals for increasing bank lending, especially to small businesses.  He also stressed that it was the coalition’s focus.

The Prime Minister addressed a town hall meeting in Manchester.  H e said: “The banks should be lending.  We put all this money into banks to stop them falling over.  They should be lending money to business.

“We are working on a programme of looking at either net lending agreements with the banks or actually having a loan guarantee scheme to help make sure the money goes out of the banks into the businesses.”

“There is a very big focus…including in my office, to make sure that happens,”  he added.

Business Secretary Vince Cable has already warned banks to refrain from paying out shareholder dividends and executive bonuses instead of lending.  Banks came  in with second quarter profit reporting at hefty levels.  Cable told the banks they could face a tax on profit if they chose to pay out dividends and bonus incentives at the expense of lending to small businesses.

The six major British banks announced a new task force to study and design ways to increase business lending.  The task force sent a letter of their intent to Chancellor George Osborne.  Osborne has also been applying public pressure on banks to increase lending to small and medium sized business.

While banks have defended themselves saying that small business owners have not been searching for new credit, small business has said banks are making it to difficult to obtain lending.

The new task force is due to report in October.

Comments & Debate

  1. October 31, 2010 at 2:53 pm Peter L. Griffiths Commented:

    Vince Cable is in danger of making the same mistake as Jimmy Carter in forcing banks to lend to defaulting debtors who brought about the United States financial crisis of 2006-2008.

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