Downing Street Says » Bank Lending

Asked if the Prime Minister thought that banks were charging small companies too much, the PMS said that the Prime Minister certainly thought that there were some issues that needed to be looked at, both in terms of bank charges and the volume of lending. We had recapitalised the banks and we had also engaged in a significant programme of insurance of some of the assets on their balance sheets. It was the Government s view that this combination was sufficient to ensure that banks could lend at the levels that they themselves committed to as part of their lending agreements.

Put that capital requirements were putting the cost of loans up, the PMS said that it was the Government s view that the combination of the capital that the Government had put into the banks, plus the very significant levels of insurance that we were providing for the bad assets on their books was sufficient to ensure that they could lend at the levels that the banks themselves agreed to lend at as part of the lending agreements.

Asked if the Prime Minister was optimistic that today s meeting would achieve more than previous meetings, the PMS said that it was important that we continued to engage with the banks and it was important that we continued to do more in order to ensure that the banks were held to account for the significant amount of public money that had been available to them. The meeting was an important part of that process. Asked if the Prime Minister thought that the banks would achieve their targets, the PMS said that we were only halfway through the year; the targets applied to the year as a whole, but clearly the Prime Minister wanted to see the banks lending at the levels that they had agreed to lend at.

Put that lending was up significantly but foreign banks were not lending, the PMS said that that was a longstanding problem. That was why we had taken action in this country in order to help our banks fill that gap. We were only halfway through the year and we needed to keep monitoring this. Put that the Government expected UK banks to fill that gap, the PMS said that that was what we needed to continue to keep discussing with them.

Put that interest rates for small businesses had become increasingly high and was the Prime Minister concerned about that, the PMS said that of course he was concerned about those reports and that s what the Chancellor had been speaking about yesterday.

Put that the Government had never been in a stronger position with the banks and that should be used to the Government s advantage, the PMS replied that that was why we signed lending agreements with the banks that committed them to specific levels of lending under particular circumstances.

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» Monday, July 27, 2009

Bank Lending

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