Banks urged to boost lending

0 Comments | Daily Post; Liverpool (UK), Jul 27, 2010 | by DAVID JONES

AROUND pounds 50bn of new lending to business could be generated if banks limited bonuses and dividends, says the Government.

Business Secretary Vince Cable said there was currently a “dialogue of the deaf”, with business groups complaining of their frustration at how difficult it was to access finance while banks maintained they were meeting 80% of requests.

Dr Cable said he believed small and medium sized firms were facing a “very serious problem” on raising finance which needed to be addressed, given the importance of the sector to job creation. The Business Department published a joint consultation paper with the Treasury setting out options for improving the flow of cash to businesses.

Regional stock exchanges, more government loan guarantees and moves to boost banking system liquidity were among suggestions of ways to increase supplies of much-needed finance.

Dr Cable warned banks that he could ask them to sign up to the type of loan guarantees already agreed by part-nationalised banks RBS and Lloyds if they did not act.

“If bonuses and dividend payments are too big, the Government has the option of looking at taxation of their profits,” he said. “There is a choice between giving out cash in bonuses, or re-investing
small business loans

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