UK Business Secretary: The Banks Are "Misleading" You

Posh British

The UK’s business secretary Vince Cable has called out the country’s banks on misleading the public in regards to how much lending they are actually doing.

Royal Bank of Scotland and Lloyds have said that they are approving 80% of loans, but Cable denies this saying they’ve changed the rules around lending so much that those numbers are, “misleading small firms.”

Cable, who is a Liberal Democrat, points to a bounty of evidence that is suggesting, “banks are not lending as much as is needed.”

Cable may have it right that banks are lending less than they are suggesting, and that current lending levels are not high enough to increase growth and employment. But he has it wrong in blaming the banks for this cash hoarding.

The reality is conditions in the UK, with significant uncertainty over financial reform and the impact of Basel III, along with alterations in what are acceptable risks for lending, are what is really hindering lending. Banks, and other corporates are choosing to pay down debt, rather than lend, as uncertainty reigns.

For more on this sort of recession, see Richard Koo’s excellent presentation on the subject >

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