Barclays, Lloyds Banking Group and RBS are all due to report first half earnings for the year this week. Analyst have stated that profits are expected from all banks as they recover from the past financial crisis. British finance minister George Osborne told banks to use the profits to boost business lending rather than pay bonuses to executives.
“We have got to be pretty clear with the banks, as I was when I got them into my office a couple of weeks ago, that we will not tolerate banks piling the pressure on SMEs. They have an economic obligation to assist that sector and give it all the assistance that they got,” said Osborne.
He added: “If you maintain the renumeration and dividend levels of what they were a year or two ago that would allow additional borrowing capacity.”
Though the Bank of England lent British banks almost 200 billion pounds during the height of the financial crisis in 2008 the repayment will not begin in 2011.
The Bank of England has suggested banks put back profits and start building funds for repaying the debt they owe to government. If Banks reduced lending rather than using profits for repayment it could damage Britain’s private-sector economic recovery.
This would be further damaging to unemplyment as the private sector is expected to build jobs in the face of the public-sector jobs that will be lost thanks to budget cuts.