Sluggish Lending:German Finance Minister threatens banks with unprecedented measures

Discussion in 'Economics' started by ASusilovic, Jul 4, 2009.

  1. Politicians of all parties are united in their determination to force German banks to make credit available. Financial institutes remain reluctant to lend despite having received billions in finanical aid.


    German Finance Minister Peer Steinbrueck in a newspaper article to be published in Sunday's tabloid Bild, warned banking managers over their reluctance to lend.

    He says that he was doubtful that a bill passed on Friday in Berlin to allow German banks to park their toxic assets in a so-called bad bank structure will be enough to get the banks back into the business of providing credit.

    Instead, he's threatening banks with unnamed sanctions should a credit crunch be the result of their too conservative lending policies. His warning is that the government and the central bank will have to take steps to force the bankers' hand. These as yet unspecified actions, Steinbrueck warns, would include measures never before used against financial institutions in Germany.


    German President Horst Koehler - himself a former head of the World Bank - added his voice to the critics in a television interview.

    "I appeal to the banks to do more to ensure that the economy can grow," he said.


    http://www.dw-world.de/dw/article/0,,4456241,00.html?maca=en-DKpartner_yg_infomix_en-2315-xml-mrss

    Loans to households and companies grew at the slowest pace since at least 1991 in May, rising 1.8 percent on the year, the ECB said this week. Cheaper credit “has not filtered through” to Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, Chief Financial Officer Friedrich Eichiner said today at a conference in Munich.

    “There is a serious concern that banks are in no position to kick-start lending,” Peruzzo said. “Banks are seriously under stress.”

    Marco Annunziata at UniCredit Group says financial institutions may also keep putting money in safer assets or just leave it at the ECB. The central bank said today banks deposited 288 billion euros with it overnight, the most since Jan. 14. The ECB currently pays 0.25 percent on deposits.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=awlglj0rbRfk
     
  2. Banks have good reason not to lend when they are scared, financially weak, and the potential loan recipients look shaky as hell. Some bureaucrat's jawboning isn't going to change that.
     
  3. LOL ! You have just described the very state of "the banks" 8 months ago. "Financially weak, highly risky and shaky as hell."

    The "bureaucrats" you are talking about have saved "the banks" asses ! :p
     
  4. Exactly.
     


  5. maybe that's a threat that the government will assume all downside risk of lending? lol
     
  6. I love the part where it says "buyers with shaky credit may find it hard to obtain loans."

    As if it should be any other friggen way!

    If your credit sucks, you shouldn't get a loan. That's the WHOLE POINT of your credit rating!
     
  7. Germany has a great track record of giving out threats and following up on them :cool:

    German banks already play virtually no role on the international circuit as a percentage of global banking. Once the government forces them to take more junk onto their books they can kiss them good bye.