Downing Street Says

Asked to explain what the Prime Minister had meant when he talked about plans to bring forward proposals to get banks to lend to businesses, the Prime Minister’s Spokesman (PMS) told the assembled press that this was something that we kept under constant review. There was a particular issue surrounding the resources available to small businesses and, as people would expect, that was something that the Chancellor would address in the PBR on Monday.

Asked to confirm that there would be measures to kick-start lending, the PMS said that there would be measures to support small businesses that had been affected by the issues relating to bank lending.

Asked if any more public money would be used to support the banks, the PMS replied that the Treasury had made a clear statement yesterday about where we were on the bank re-capitalisation programme and that was where we were.

Asked if the Government was considering the idea of Government guarantees to underwrite loans as a way of encouraging banks to resume lending to small businesses in particular, the PMS said that the Prime Minister had been saying in the House of Commons that we did need the banks to fulfil the commitments that they themselves voluntarily entered into at the time of the re-capitalisation programme. This was to ensure that the availability and marketing of lending was at 2007 levels.

We had also made clear that we would do whatever was necessary to help the economy in order to help it through this difficult period and there was a whole range of issues that we kept under review. In the first instance, we did need to make sure that the banks do fulfil the commitments that they themselves entered into. The PMS added that he would not comment on specifics.

Asked repeatedly if he thought the banks were not fulfilling their commitments, the PMS said that we were yet to see the full impact of the bank re-capitalisation programme. We had seen the libor rates coming down quite significantly in the past five or six weeks and had seen banks being able to pass on the reduction in interest rates that may not have been possible had they not have been adequately capitalised.

We had also set up a process with the banks, small businesses, the Department for Business (BERR) and the Treasury that enabled us to monitor, engage and discuss with the banks their lending practises to small businesses.

Asked how long the banks had to fulfil their commitments, the PMS said the Government fully understood the difficulties that were being faced by small businesses and families and we were determined to do everything we could to ensure that the public and businesses got through this difficult period. We would continue to work very closely with the banks in the period ahead.

Asked whether the promise to make loans available at 2007 levels applied across the board or was it purely focussed on small businesses, the PMS replied that people should check the wording in the bank re-capitalisation document but he thought it applied to mortgages as well as small businesses. Asked if a solution would apply to all banks and not just those that had been re-capitalised, the PMS said that when we were in a position to make further announcements we would do so.

Asked if the steps being proposed by the Government would be directed at the companies themselves or would it be via the banks, the PMS advised people to wait for the PBR.

Asked if the Government had considered the idea of having some form of Government bank so that the Government itself could provide loans, the PMS said that the priority for now was on ensuring that we got the existing institutions working better. We kept all options under review as people would expect, but the priority for now was ensuring that the banks delivered on their commitments.

Put that there must be a certain amount of frustration with the banks and did the Government think it would be easier to nationalise them, the PMS said that we had no interest in running banks on a long-term basis or maintaining ownership of banks on a long-term basis. That had always been our position and we thought that banks were best run as private sector institutions. We had taken the action that we had done due to the extraordinary circumstances that we were in. The Prime Minister, the Chancellor and the Business Secretary like everyone, wanted to see small businesses get as much help and support as they could at this difficult time.

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» Wednesday, November 19, 2008

Economy

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