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British economy closer to double dip as banks stop lending



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Why should they? Politicians all over handed them money without strings attached and now expect the banks to show appreciation for being saved. We all know that when the tables are turned the banks would not hesitate to make demands in return for billions.

The disturbing part of the story is that the banks (and media) are again flogging a PWC study about how regulations are the cause of the banking problem. It's annoying to see this continue to receive attention because PWC is very active with the banking industry so they are not even close to being a neutral source. They're lobbying to help their customers. Reading this makes me wonder if this is the government's attempt to move backwards on regulation to make it an even easier ride for the banks. Saving them from ruin was probably not enough.

A green paper, to be rushed out by the chancellor and business secretary before next week's parliamentary recess, will acknowledge the scale of the lending rationing crisis, which could "abort" the fragile recovery.

As the Bank of England (BoE) published data showing yet another month when more loans had been repaid than had been granted, Cable admitted the level of anxiety in the government about the flow of funds to smaller companies. He said: "The green paper will acknowledge the scale of the problem and how the recovery could be aborted if we don't get on top of this.

"There is a fundamental policy conflict between efforts to make the banks safer and our wish to get them lending more freely to promote growth," Cable said.

He has been presented with research from the banks – which have given the work by PricewaterhouseCoopers the name "Project Oak" – showing that tougher capital rules and the end of emergency liquidity injections from the BoE could drain the banking system by £1 trillion in the coming years.


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