UK´s Darling concerned about what banks do for small companies

Chancellor of the Exchequer Alistair Darling will call on Britain’s banks to reduce the cost of loans to small companies as he seeks to prevent the economy from slipping further into recession.

In a meeting at the Treasury in London today, Darling will tell chief executive officers from companies including Royal Bank of Scotland Group Plc and Barclays Plc that they must do more to help the economy in return for government assistance.

“I am extremely concerned about what the banks are doing for small companies,” Darling told BBC Television yesterday. “What companies are being charged seems to have gone up relative to what they have to pay.”

The U.K. economy shrank more than twice as much as economists forecast in the second quarter as a record annual slump in construction, banking and business services kept Britain mired in the recession. The British Bankers’ Association said loans to small companies increased by 23 percent in June compared with a monthly average for the year.

Angela Knight, chief executive of the BBA, told BBC News television that banks are “stepping up” lending. Figures compiled by the lobbying group showed loans to companies with sales of less than 1 million pounds ($1.6 million) increased to 366 million pounds in June compared with a monthly average of 297 million pounds this year.

The BBA said later in a written statement that capital requirements imposed by the government that are twice as high as those of other countries and a higher default risk were pushing up lending costs.

“Thousands of businesses likely to go to the wall, so how can banks in all conscience be irresponsible over their lending policies?” said David Buik, Market Analyst at of BGC Partners in London. “Ill considered remarks by the Chancellor from the cheap seats will fall on very deaf ears. He cannot have it both ways.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=ak.bNqbf7qFg

Yep, the worst is over...

 

unfortunately now that no one is purchasing credit and default derivatives the bank has to hold onto more risk so interest rates rise. interest rates should never have been so low in the past it was only possible because they were selling the risk to other people in hidden packages that turned out to be bad investments.

i think for this reason the chancellor's aims are unrealistic. the other problem is a liquidity problem i know that they say there is deflation. it is however relative interest rates are lower so if the rate falls further there will be no incentive for saving because the gap between the inflation rate and interest rates will have widened further making investing less appealing (instant loss on saving).

due to the banks acting as agents for savers the investments that would not have been taken by savers are still not being taken by banks, but because the bank takes the responsibility for the investment it makes them look negligent. however if people had to do the investing themselves it will decline as a result of negative returns by making the bank the agent it defuses that risk responsibility from themselves to the bank.

i currently have a paper being reviewed by the government and the shadow treasury team, which i have told you about before. i won't go into detail but it looks at another way of generating capital and providing safe investment, which eliminates the problem experienced in this situation as the risk reduces and return can rise without having negative consequences on the economy.

he is understanding that unless that lending mechanism starts up the economy will not recover, which is a step in the right direction. he does not have much room for mistakes so has a difficult job. i wonder if he has come to the same conclusion i have about the credit market and the limitations of the interest rate.

 

"Slicing and dicing" isn´t anymore every investment bankers favorite sport...And now that the FSA is becoming "brutally administrative", it´s not even more fun to be "IB"...

>>>>>>>


Up to 2,000 traders and managers in the UK could face extra checks and even interviews by the UK financial regulator to ensure they are “fit and proper” to do their job. Traders, bankers and managers who exert significant influence over their companies are set to face additional scrutiny from this week as the FSA watchdog formalises proposals to widen its “approved persons” regime. The tests covers senior positions at the largest 40-50 banks, insurers and other institutions.

http://ftalphaville.ft.com/blog/2009/07/27/63756/fsa-extends-tests-to-traders/

 

there should be some moral test too. they should make them sign a declaration stating they understand what not to do and when they have signed it and do something wrong they should throw the book at them.

if they do anything wrong they can't say they didn't know as they signed a declaration stating that they knew it was wrong.