The chief executives of the six biggest banks in the UK are to fight back against government concerns that they are not lending enough to businesses by setting up a taskforce to help tackle the credit drought. A week after the major banks reported combined profits of more than £15bn, they have written to the chancellor to tell him that they agree about the need to extend loans to viable companies. However, they do not go as far as to concede that they are not doing enough.
Writing on behalf the banks, Stephen Green, chairman of HSBC, tells George Osborne that the bankers' taskforce will look at four main areas: the price of lending and demand for loans; helping banks obtain finance through securitisation; government-backed lending schemes for businesses; and other ways of backing businesses such as through trade finance. The banks have begun their retaliation after a week in which they stressed the demand for lending from small businesses was down by as much as 25% and that customers were repaying loans faster than they could grant new ones.
The British Bankers Association, which is co-ordinating the banks, said that the chief executives of HSBC, Barclays, Royal Bank of Scotland, Lloyds Banking Group, Santander and Standard Chartered, would chair the taskforce being set up in response to the government's green paper on finance, which is designed to ensure a private sector recovery can outpace the cuts in the public sector. Attempts by the banks to show their willingness to co-operate with the government come as they also reject calls for a possible break-up of their businesses by the commission set up by the coalition.
While the commission is not due to report before September next year, the subject of breaking up banks and stimulating lending is of crucial importance to the Liberal Democrats who put the banks on notice this weekend that it intended to achieve its dual goals. Last night the Lib Dem treasury spokesman Lord Oakeshott said: "The banks brought the economy to its knees and there's a very good reason why banking reform is the first item in the coalition agreement. "Breaking up the banks and making them lend is a critical part of why the Liberal Democrats are in the coalition."
While the commission is not due to report before September next year, the subject of breaking up banks and stimulating lending is of crucial importance to the Liberal Democrats who put the banks on notice this weekend that it intended to achieve its dual goals. Last night the Lib Dem treasury spokesman Lord Oakeshott said: "The banks brought the economy to its knees and there's a very good reason why banking reform is the first item in the coalition agreement. "Breaking up the banks and making them lend is a critical part of why the Liberal Democrats are in the coalition."
The credit crunch – which began three years ago today – and the ensuing banking crisis has sparked a debate about banks being "too big to fail" because of the £75bn of taxpayer funds used to bail out RBS and the now combined HBOS and Lloyds TSB. The financial crisis has also resulted in a major reduction in lending to businesses, which have been repaying loans faster than new ones are granted. While business leaders and politicians argue that banks are making it difficult to borrow by making terms too onerous, the banks say demand is falling and that they must avoid a repeat of the crisis by only lending money to customers who can repay it.
The banks have also been trying to convince the government that they do not need to be broken up. Barclays last week said it was considering its "options" as a result of the threat of break-up, while HSBC reckoned it was "big enough to cope" rather than too big to fail. Eric Daniels, chief executive of Lloyds, told the Sunday Telegraph that he had been "given reassurances" that Lloyds would not be broken up in the future by the previous government when it tore up competition rules to allow it to rescue HBOS.
the Guardian
the Guardian
