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June 10, 2009

Banks not lending enough to see off recession

by Gill Montia

Story link: Banks not lending enough to see off recession

A Deputy Governor of the Bank of England has warned banks that the economic recovery is dependent on increased lending.

Speaking at the London conference of the Association of British Insurers, Paul Tucker described current lending levels as “subdued” and questioned whether they could sustain the economic recovery.

For the banks themselves, failure to lend at levels that can see off the recession is likely to increase bad debts and bankruptcies and could therefore be self-defeating.

Last week, German Chancellor Angela Merkel publicly criticised the UK Government’s quantitative easing policy, which aims to restore credit.

She warned that it could worsen the economic crisis by stoking inflation.

Her comments came as new figures from the Bank of England showed that lending to UK businesses and individuals fell during April, despite the quantitative easing strategy.

According to a report in The Times, lending to UK business other than banks and other financial institutions fell by £4.7 billion in April, representing the biggest monthly decrease since records began over ten years ago.


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