LONDON: British finance minister George Osborne urged the country's banks to use strong first-half profits to boost business lending rather than pay large bonuses, in an interview published late on Saturday.
Barclays, Lloyds Banking Group and Royal Bank of Scotland are all due to report first-half earnings next week, and many analysts expect hefty profits as the banks begin to put the financial crisis behind them.
In an interview with the Sunday Telegraph newspaper, Osborne said on Aug 1'' his stance was backed by the Bank of England, which has called on banks to set aside profits in preparation for the repayment of emergency central bank loans due next year.
"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 (small- and medium-sized enterprises). They have an economic obligation to assist that sector and give it all the assistance that they got," Osborne continued.
"If you maintain the remuneration and dividend levels of what they were a year or two ago then that would allow additional borrowing capacity," he said.
Britain's government owns large stakes in Lloyds and RBS, which together with Barclays and HSBC dominate the country's banking landscape. However, the bank stakes are held at arm's length and Osborne does not have direct control over Lloyds' and RBS's pay and lending policies.
The BoE lent British banks almost 200 billion pounds ($312 billion) during the height of the financial crisis in 2008 which they must repay next year. If banks reduce lending to businesses in order to make these repayments, this could derail Britain's private-sector economic recovery just at the time when sharp public-sector cuts will start to bite.
Osborne said banks' business lending was already highly restrictive, echoing recent comments from business minister Vince Cable.
"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 said.
"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." - Reuters
Barclays, Lloyds Banking Group and Royal Bank of Scotland are all due to report first-half earnings next week, and many analysts expect hefty profits as the banks begin to put the financial crisis behind them.
In an interview with the Sunday Telegraph newspaper, Osborne said on Aug 1'' his stance was backed by the Bank of England, which has called on banks to set aside profits in preparation for the repayment of emergency central bank loans due next year.
"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 (small- and medium-sized enterprises). They have an economic obligation to assist that sector and give it all the assistance that they got," Osborne continued.
"If you maintain the remuneration and dividend levels of what they were a year or two ago then that would allow additional borrowing capacity," he said.
Britain's government owns large stakes in Lloyds and RBS, which together with Barclays and HSBC dominate the country's banking landscape. However, the bank stakes are held at arm's length and Osborne does not have direct control over Lloyds' and RBS's pay and lending policies.
The BoE lent British banks almost 200 billion pounds ($312 billion) during the height of the financial crisis in 2008 which they must repay next year. If banks reduce lending to businesses in order to make these repayments, this could derail Britain's private-sector economic recovery just at the time when sharp public-sector cuts will start to bite.
Osborne said banks' business lending was already highly restrictive, echoing recent comments from business minister Vince Cable.
"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 said.
"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." - Reuters
No comments:
Post a Comment