Bank Of England Offers Loans To Spark Economy
UK bank stocks have risen strongly after the Bank of England pledged to offer new, low-cost loans to help protect them and also encourage lending into Britain's shrinking economy.
At a speech in the City of London on Thursday night, the bank's governor Sir Mervyn King blamed the eurozone crisis for "exceptional circumstances" in which banks are struggling to borrow at affordable rates from international markets.
The Bank of England will respond by introducing a new "funding for lending" scheme to provide loans at a cheaper rate than international markets as long as banks use the money to provide credit to households and businesses.
Sir Mervyn said: "It would complement the Government's existing schemes, and tackle the high level of funding costs directly. It could, I hope, be in place within a few weeks."
In response, shares in part-nationalised Royal Bank of Scotland (RBS) were the best performers on the FTSE 100 - rising up to 8%. Lloyds Banking Group and Barclays gained 4%.
But there was some scepticism.
Banking commentator Iain Anderson told Sky News: "Given the stresses in the system at the moment, this is going to have to be a very significant package to make a difference.
"We're going to have to see the detail, we're going to have to see the numbers before we can work out if it can make a difference."
Shadow chancellor Ed Balls argued the bank and the Treasury could not use the eurozone crisis as an excuse for the shift in policy.
He told Sky News it was an admission that the UK economy's recovery had been damaged by the coalition's lack of action to secure growth.
In his speech, the Chancellor outlined the Government's proposals to prevent future banking crises and protect depositors' and taxpayers' money in the event of a banking collapse.
George Osborne told City grandees in his Mansion House speech: "I believe that we have found a workable way to solve what I called the 'British dilemma' - protecting British taxpayers in a way that does not make the UK uncompetitive as a home of global banks."
New reforms to banking regulation, based on the recommendations of the Independent Commission on Banking, include splitting high street and investment banks to ensure ordinary savers' money is protected from risky investments going wrong.
Banks will also be forced to hold cash reserves worth 17% of the value of their business to help them keep trading in the event of a bank funding crisis such as that which led to the collapse or Northern Rock in 2008.
But British banks will not have to hold extra reserves on behalf of subsidiaries outside the European Economic Area provided their UK businesses are not be affected by the collapse of those subsidiaries.
The banking industry has resisted the reforms arguing they will push up the cost of doing business and that higher costs will have to be passed on to customers who have grown accustomed to free banking services.
Kevin Burrowes, UK financial services leader at PwC, said: "We all want a stable, highly competitive, customer focused UK banking sector.
"The very heavy burden of all this regulation and the management effort required to address it could potentially make our banks uncompetitive globally.
"The rapidly growing financial institutions from emerging markets will seek to exploit the opportunities this gives them."
what do you think?
Wait, or banks now suddenly have no money either? Perhaps start taking back the money from the overpaid greedy fat cats they wont be short. Then there is also only allow politicians minimum wage from our taxes...
Are the banks repaying any of their bail out money yet as that should be available for investment.
The reason banks wont lend money is a simple one. They know the world financial system is heading for a monumental crash and no one lends money knowing they wont get it back.
You are right. You can see it whuy can't the politicians see it
wow another miracle pulled out of the coalition box of tricks. no money for the armed forces. education. hospitals welfare etc but lo and behold loadsa money for the very people who created the mess in the first place. and yet another shift in this inept bunch of no hopers .it stinks to high heaven utterley disgraceful
How will this 'encourage' banks to lend? They won't lend if they can't make a profit or at least get their (our?) money back.
Banks will not lend to bad business or individuals. We have moved away from the Labour party instructing banks to lend even to very speculative business plans and mortgages that were not sustainable. The banks should have told Brown what to do with his directions. People in the UK should not forget that thanks to the conservatives, the UK is regarded as a strong economy, a sfae haven for overseas money and our bond rates are almost the lowest in Europe. What is crippling the UK is the absurd debt passed on by labour and a grossly inflated public sector due to the actions of Brown. Its about time Uk citizens faced up to the truth
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As a lapdog Tory you see no wrong ,love or hate Gordon Brown he was the right man at the time who did save the worlds banks while others dithered and ran hoping not to be put in gaol. His only fault was following the Thatcher economics and TRUSTING Banker`s
Its the regulator that let us down not the banks the banks did what the government wanted them to do and that was to give mortgages to people who could not afford them. I suppose thats socialism in a way. Blame the regulator that of course is the BOE. Brown was hopeless as chancellor
all the time Gordon was taking £50 billion a year in tax off the banks he chose to ignore how the banks made profit. When the manure hit the fan Gordon chose to condemn the banks for not continuing to pay for his dilusional dreams
Sure why not give more money to the bankers bonuses !!!!!!, it worked well last time (Northern Rock,RBS etc)
When will the banks honour savers and put the interest rates up?????
Bank shares rise with TAX PAYER`S money our children will be paying for the increased interest`s and the greedy Bankers will claim huge bonuses just for passing on our money. The Queen will then give them Knighthood`s, funny old world (NOT).
Buy bank shares then benefit from the increase and stop whining or are you too busy spending your dole money on cheap cider
It is not the BoE helping, it is the taxpayer once again. The banks have resisted lening to rebuild their reserves, so addition al money has had to be found. Yet we are told that the country is broke, and cannot afford adequate armed forces or policing - all we can afford is more and mnore overseas aid and propping up the IMF!
So the BoE is giving billions to our banks at 0.5% interest and they will give to us on loans money at 10% interest or on mortgages at 6%. and the funny thing is that the BoE is using OUR money. So all the banks will have billions in their pockets but we have NOTHING. Osbourne says we cannot afford the Armed forces by 3.5 billion as I have to give to foreigners about 15 trillion. I know they are terroists but they need the money to put into their own bank account.
Osborne is a disaster - very dim. I was amused to see that Spain finds debt unaffordable at 7% - but credit cards are three times that sum, and that's not funny.
I'm certainly not agreeing what the financial institution (BoE) is doing but the money is NOT ours, but belongs to the BoE, they 'lend ' it to smaller banks (at interest) and they to us (at interest), money is debt and debt is money. If the money were created by the government (not the BoE) when the debt spirals out of control, as is happening, it could be wiped clean, but as the BoE is a business in its own right, owned and controlled by elite people, the debt will not be cancelled. Were presently at the tip of a huge iceberg, and there's only one way its heading.
The BoE, Mark, is nationalised and so its owned by US, the taxpayers/voters. It is either OUR money or it has printed addition al money, which in turn devalues OUR money.
just watched obnoxious osbourne being interviewed on tv bragging britian has loadsa money to lend to the banks plenty cash floating about for the banks pity he has no money to dish out to the people that really need it eh.no money for the army hospitals welfare but plenty for his rich mates the man oughta be ashamed of himself but i forgot these people dont know the meaning of the word
Just put me right, WHERE is all this money gorgeous George is getting , comming from? Wait, it must be the tax slaves,IE workers who still have a job, with no protection, no increase in wages unless paid for by the government
so we give mortgages to youngsters with tiny deposits on regular 20 + hours per week and a promise of regular overtime to buy the properties at rock bottom prices abandoned by the last generation of would be house owners,just another way of trying to jump start the economy,much better to give the money to industry with a promise to give these people a chance to earn a full weeks work for a full weeks pay, then we can start again, and i mean industry not some foreign company trying to take our order books back abroad and take advantage of our tax breaks.
It's all about banking these days isn't it? What about manufacturing? Oh, that's right, to be competitive that's been outsourced to China. So we've nothing left to sell but what other people make. Not a good basis to run an economy on if you're not Swiss.
Ha ha ..........clueless ,if he thinks that will fix it .Lets see what happens shall we.