Government Pressure on Banks to Lend

Government Pressure on Banks to Lend.

Danny Alexander Treasury has announced that as from January major UK banks will be required to detail their lending in local areas.

The hope is that by publishing details of lending thousands across 10,000 postcode areas, will help boost credit for homeowners and businesses.

This is predicted to help stimulate competition by helping them spot gaps in the market, and where they could take advantage. This improvement into transparency will allow the government and lenders to see where businesses are struggling to find lending, and also details of mortgages and personal lending.

Our View

We cannot see how this will improve lending cash flow.  Banks have been blamed for the credit crunch and for lending too much, creating toxic debt.  Both lenders and advisers have a regulatory duty to ensure that lending is 'suitable and affordable' meaning they are responsible for ensuring the loan is correct for a clients needs or else they can be fined and end up paying compensation. 

Likewise, all financial companies have new capital adequacy requirements meaning they must keep more capital in reserves so that they are financially viable even in difficult economic climates.

Any government pressure to lend is literally a false economy.