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Bailout agency to make sure banks are lending
Paul Waugh, Deputy Political Editor03.11.08
A NEW government agency to oversee the £37billion bank bailout was unveiled today with a direct remit to get money flowing again to recession-hit businesses.
Chancellor Alistair Darling set out details of the bank reconstruction body as he and Bank of England Governor Mervyn King faced a grilling from MPs over the financial crisis.
The arms-length agency will manage the Treasury's £37 billion stake in Royal Bank of Scotland, HBOS and LloydsTSB with unprecedented daily monitoring of their lending activities.
Loans to small businesses and fair deals for mortgage holders will be central to its tasks as ministers seek to ensure the banks do not ramp up profits at the taxpayers' expense.
The banks' voluntary code on lending to small business is also set to be tightened this week, under pressure from the Government, to ensure customers are given reasonable notice before loans and overdrafts are axed or rates increased. The new agency's terms were unveiled amid increasing political concerns that the part-nationalisation of the three high street banks is not reaping the promised benefits for small business.
Mr Darling, Mr King and the Financial Services Authority chairman, Lord Turner of Ecchinswell, were giving evidence to the Commons Treasury Committee today as it began its inquiry into the events of recent weeks.
Gordon Brown and Mr Darling initially won plaudits for their bank bail-out, which has provided a blueprint for similar schemes around the world.
But while it was credited with stopping the banking system collapsing, there has been frustration that it has yet to restore the flow of credit to businesses.
There are also questions over how effective the Government's efforts, agreed as part of the bail-out deal, to curb the City bonus culture are proving.
The witnesses also face questions over claims UK authorities knew Iceland's banks were in trouble six months before they collapsed leaving many UK charities, councils and other public bodies with funds frozen and no certainty they will get their money back.
Unusually, the committee has invited members of the public to submit questions which they would like to see put to the authorities about the bail-out.
Chairman John McFall said: "Taxpayers are very concerned about the scale of this investment."
Reader views (5)
Don't be so silly you bunch of Mc Numpties. Government behind bankers! Think about it! Loss,Loss,Loss, Bonus, bonus,bonus, tax payer loses on loses and every banker is happy and Loony Labour sill full of envy and still trying to create a new class war. Give-up boys and remember what Maggy used to say YOU can't buck the market system.
- Mike, London
I hope I am wrong, but whenever a policy runs into difficulty, this Government creates an arms-length agency in order to distance itself from the fall-out caused by its own inefficiency. Despite saying that they had no wish to manage Banks, Government Ministers are showing themselves all too willing to order Banks around rather than letting them return to proper comercial practice. Of course the tax payers interest needs to be protected - but that is more likely to happen when Banks recover as sound businesses. Government simply does not deliver good commercial value or sound business acumen.
- James Elliott, Eastbourne UK
If the government cannot make the banks act responsibly, having been given so much tax-payers' money, then can we ask for it back, please? Hands up those who don't want to see bankers getting their bonuses from our tax payments. Sarkozy has asked French county councils to check on their local banks to ensure they are acting responsibly. If not, he will pass legislation empowering direct intervention. Not a bad idea, eh?
- John Problem, Hackney Wick, London, UK
Who will the government appoint to head this new agency to oversea the banks? Without a doubt ex bankers and City types who with a smile and a wink will allow the banks to continue to do exactly what they have been doing for years. Which is being plain greedy and grossly unfair to their customers and the public in general. And the taxpayers money would have been wasted.
- George, London, UK
Is notthis how we got in the sub prime problem - Governments deciding who should be lent monies rather than strict banking principles. Does a bank have to mend to a Ninja or a failing company to meet targets? Here we go again.
- Simon - Bucharest, bucharest - Romania
