Darling: Involvement in banks will last 'for some years'

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The Independent Online

It will be "some years" before the Government no longer holds shares in some of Britain's biggest banks, Chancellor Alistair Darling warned today.

Mr Darling spoke a year after the Government stepped in to save some of the banks from collapse.

The multibillion-pound bail-out has left the Government as the major shareholder in RBS and with a heavy stake in the Lloyds Banking Group.

Mr Darling said the "extraordinary" action, taken a year ago, was necessary "because otherwise we would have been faced with a situation where the banking system would have fallen into the abyss".

Speaking on BBC Radio Scotland's Good Morning Scotland, the Chancellor said: "We had to step in, we had to spend a very large sum of money to do that."

But he stressed: "A year on, the financial sector is much more stable."

However, he also said: "It will be some years before the Government is able to sell the last of its shareholdings.

"We did this for a purpose, we did this to stabilise the financial system, and we will do it for as long as it takes, until we've got these banks restored to health."

He went on: "The reason we're doing it, of course, and we shouldn't lose sight of this, is not for the banks or the bankers themselves, but because if you don't get credit flowing in the economy then you won't get the growth that creates the jobs.

"That's why we're doing it and that's why it's so important that we keep on with this."

Mr Darling added it would be "extraordinary" if the problems in the banking system had been resolved a year on from the bail-out.

He stated: "This is a major global problem, the like of which we just haven't seen in present generations. It would be extraordinary if, 12 months later, you said 'Well, that's it, it's all sorted out'.

"It isn't. There's still problems that we need to sort out in the banking system, not just in this country, in other countries as well."

Mr Darling said that, while the mortgage market was "coming back" and larger companies were finding it easier to borrow money, there was still a problem with lending to small and medium-sized firms.

He said: "Although some businesses are now getting money, there are others where there is still problems that need to be resolved.

"I hope we can sort that out because if we're going to get a sustained recovery then you've got to ensure that small and medium-sized businesses, which employ the vast bulk of people in this country, that they get the credit they need."

The Chancellor said this was "all work in progress" and added: "If you look around the world you are beginning to see conditions improve, you're beginning to see bank lending, while not anything like back to where it was, it is getting better. If you look at business surveys I think people can see that we are beginning to come through this.

"But, as I have said time and time again, I do think we need to be cautious, there is still problems that need to be resolved."