Leading article: Force them to lend

Share
Related Topics

The banks are back to profit, but not seemingly to full business. First of the banks out of the traps yesterday was HSBC, whose profits for the six months this year more than doubled to £7bn, with profits in the UK rising 26 per cent. Lloyds, Barclays and RBS are all expected to follow with similar results.

It's good news for the British taxpayer, who can expect to get back some of the £200bn state loans to Lloyds and RBS sooner rather than later, and to be able to gain a handsome profit when the state sells its shares in the two banks. But it does not appear to be such good news for small and medium-sized businesses in this country, most of whom report continued difficulties, and tougher terms, in obtaining funding.

Financial executives deny this, of course, arguing that they are lending billions to small businesses, that they only turn down a small percentage of requests and that the problem is a lack of demand as much as anything else. This is not, however, what their disabused customers believe, nor economists and politicians, who point to an overall decline in business lending.

The argument goes to the heart of the continuing contradiction between the narrow corporate self-interest of the banks and the needs of the wider community. Two years ago governments, and the taxpayers, were forced to intervene to save the banks from themselves and their economies from collapse not just through direct grants, but loan guarantees, additional money supply and low interest rates. The banks in turn have used these advantages to concentrate on rebuilding their reserves, reducing bad debts and raising extra capital through share offerings.

Fair enough. Any economic recovery requires a healthy financial sector. But the banks have not just used profit to rebuild their own balance sheets but to pay out a staggering amount in dividends to their shareholders and bonuses to their staff. This is insupportable. The Government has the means – although not the determination so far – to force the banks in which it has a majority shareholding to increase lending. It could, and should, have put a higher tax on bank profits. That money could then have been used to fund bigger tax breaks for new business in the recent Budget. And it has, in the revamped powers of the Bank of England, the means to exert considerable informal pressure on the leaders of the industry to mend their ways. Instead of just berating the banks, ministers need to take up these weapons and use them.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

 

General Election 2015: The SNP and an SMC (Salmond-Murdoch Conspiracy)

Matthew Norman
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk