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Banks face demand to open their books
Paul Waugh, Deputy Political Editor26.11.08
BRITAIN'S banks were facing fresh government threats over their lack of lending to business today, as it emerged they could be subject to new legal curbs and public disclosure rules.
Business Secretary Peter Mandelson and Chancellor Alistair Darling are drawing up a package of measures aimed at freeing up more cash to firms and individuals.
Among the moves are a new "concordat" that would compel the banks to open their books to allow the Government to monitor their levels of lending.
If they fail to agree to a code of conduct, regulators may impose a legal requirement that companies must be given more notice of withdrawal of credit lines or changes in interest and overdraft rates.
Mr Darling is looking at rules making it clear that newly recapitalised banks must not sit on their new "cushion" of taxpayer cash and that they are expected to lend to business during the recession.
The Chancellor has ordered an inquiry to establish the full facts on lending levels. Lord Mandelson signalled his own intent with a warning of the consequences of inaction.
"It's completely unacceptable to the Government and to business in this country for banks to stop functioning as banks," he said. "We are in very intensive discussions with the banks, believe me."
Bank of England Governor Mervyn King warned yesterday that the banks faced wholesale nationalisation if they continued to fail to release money to businesses, describing the issue as "the single most pressing challenge" to the health of the economy.
Mr Darling expects the Financial Services Authority and Office of Fair Trading to stamp out what he calls the "bad practice" of banks changing terms of loans at short notice. He is also looking at ways of extending government guarantees to bank debt to offer medium-term finance for new loans.
To counter pressure from the money markets for banks to hold onto cash, the FSA could reduce minimum capital requirements so they will release funds.
Reader views (5)
I could have sworn that
Gordon Brown told us that it was our money going to rescue the banks ... and also told us we were now shareholders . ... at least I think, so, or did I imagine it ?
Oh well ... just another lie and nail in his coffin.
- Kathy Doyle, London - England
The British Government are right to make ultimatums to the banks about their selfish attitude to the UK companies and the British public they are supposed to help. They will all be nationalised shortly and they will have deserved it
- Keith Price, Luton, England
Of course banks will not give out TAX payers i.e FREE money even to the Banks get real guys.
I had trouble trying to get them not to dip their hands into my account [they were not paying my direct debit on time and only putting it through when I had taken the money out - so as to incur a charge]
Still with all of the bank charges that they made from poor [but blessed] ordinary folks like me you would think that they did not have the need for the TAX payers bail out.
- Elizabeth Obisanya, London
"would compel the banks to open their books to allow the Government to monitor their levels of lending"
Yes, what a great idea, because the current government have spent the last 12 years showing how good they are with money haven't they?
- Bob, Cheam
What does this nu Labour government really want? First the banks get in trouble for giving silly loans with their money,now they are being told to give loans to any Tom Dick or Harry.
- Stan White, leeds
