British government tell banks to start lending to businesses

George Osborne - Chancellor of the Exchequer

Chancellor of the Exchequer George Osborne  told the country’s banks they must use their first-half profits to start lending to businesses again, in an interview out Sunday.

As major banks prepare to reveal that they bounced back in the black during the first six months of 2010, they must get credit flowing, Osborne told The Sunday Telegraph newspaper.

“We have got to be pretty clear with the banks … that we will not tolerate banks piling the pressure on small and medium-sized businesses,” the finance minister said.

“They have an economic obligation to assist that sector and give it all the assistance that they got.”

HSBC begins the half-year banking results season on Monday, followed by Lloyds Banking Group and Standard Chartered on Wednesday, Barclays on Thursday and Royal Bank of Scotland (RBS) on Friday.

The banks are expected to unveil combined first-half profits of about 8.4 billion pounds (10.1 billion euros, 13.2 billion dollars), according to the paper.

“Every small and medium-sized company that I have visited in recent weeks has had some problem with their bank — either they have found it difficult to renew their overdraft or they demanded additional collateral, often someone’s house,” Osborne told The Sunday Telegraph.

“The danger is that, particularly next year, when there is a huge amount of refinancing required, that the small and medium-sized businesses suffer from a lack of access to working capital.”

In reaction, industry body the British Bankers’ Association (BBA) said the sector was “well aware” of its crucial role — and welcomed the return of profits to the troubled sector.

“Banks are well aware of their responsibility to society and our commitment to support the economy by lending to individuals and firms,” said BBA chief executive Angela Knight in a statement.

“The return of profitability to the banking sector is a positive sign and indicates that the sector is helping the UK economy move out of recession.”

She added: “Banks have made repeated binding commitments to support business. There are funds available to lend to firms with a viable business plan.

“But the industry’s ability to support the economy needs to be considered as the increased capital and cash we are required to hold cannot both be set aside and used to finance lending.”

Lloyds and RBS are now 41-percent and 83-percent state-owned, after both groups received substantial government bailouts at the height of the global financial crisis.

Source: AFP

Leave A Reply

Your email address will not be published.