Osborne: banks have an 'economic obligation' to lend

The banks are right to play safe, the must assess risk and lend or not as they see fit. Business must learn to operate within their own budget and borrow only on production of very good plan.

Unless mr Osbourne is providing a guarantee of funding then he should keep his nose out.

Spoken like a true banker Huudi?

Er Excuse me, but Mr Osborne actually owns some of the banks as the largest shareholder. So instead of wittering, just instruct those in which you have a majority stake to do your bidding.

Can you imagine the headlines if Mr Osborne demands that Lloyds / RBS lend money which is later lost due to the failure of the business he said must be lent to?

People have to realise that this is not easy to get out of now, the Bank's must return to proper decision making when lending and if that means saying "No" then that is what they must do.

To insinuate that just because they made a profit this six months they must be forced to lend money is ridiculous, the massive losses seen previously will take a long time to get back.

Before you say it I am one of the most bitter ex-bankers you will find and I'm not a defender of the Banks.

But the burning question remains: What will or can the government do if the banks don't lend more? Short of intervening in their underwriting processes (for which the government doesn't have suitably qualified people), I don't see what it can do.

Political speak. Cheap political words for the masses. One problem the economy is having is a lack of confidence and firms are simply not borrowing - the effects of public spending cuts have yet to be understood. Against this climate of uncertainty firms are not investing and banks cannot be held responsible for that. As for small firms, the argument is much the same. Consumers are not going to have as much money to spend and everyone is tightening their belts.

As for punishing the banks - how stupid can you be? To quote the Economist - "Dream on".

Wasn't it lending to all and sundry that contributed to the mess we find ourselves in today?

Whilst I agree the banksshould be lending where appropriate, if they only want to lend to viable businesses then you can't really blame them.

Am I the only person that thinks it is good that the banks are back to making profit again? It should help the tax payer ensure they get a return on their investment and contribute much needed tax revenues to the treasury coffers at a time when it is sorely needed...

Hypocrisy. George and Co (who I do still feel are the best for this job) run the FSA - who they instruct to clamp down on 'daft lending' - ushering in a time of austerity. This in turn will lead to deflationary pressures and a property crash - something that probably had to happen anyway. But to turn around and claim the banks should lend more is akin to telling himself off. Still the masses will believe it I guess.

The plain facts are that under the previous government and banking regime business and private people had been encouraged to borrow. Lending has always been a risk based assessment to suggest otherwise is stupid. The banking sector has never been interested in the concerns of its customers and has only ever focused on its on profits. It is a shame that the previous government we weak and unfortunately not in the positions as like in America to let RBS go to the wall, we would then have focused the banks to actions that were required and the position they had put the world in through greed and avarice.

It is not just a question about banks lending new money. I have witnessed banks calling in existing overdraft facilities for absolutely no reason.

It seems that those who profess to be bankers (did I pronounce that correctly?) seem to have periods when certain trades are frowned upon and all facilities are recalled for "renegotiation" - which is a one-way process whereby the facility is withdrawn without significant "negotiation".

The recent one has been the building trade. I have seen large projects shelved temporarily when the funding facilities (on a sort of revolving credit basis) were removed.

LTV's have generally reduced in the domestic mortgage market, which is of no use to the 1st time buyer who is trying to get that first step onto the property ladder.

Business lending is going more and more towards the forced-sale style of lending at most 80% of 80%.

When hard cash deposits are just not there, then these lending policies are simply stopping business from being conducted.

And distressed sales are prevalent.

Given the fact that all investments are cyclical, those with spare hard cash will be having a "field day", buying assets for pennies in the pound because they can afford to hold them until that market rises again.

The rich are getting richer, the poor are remaining at the bottom of the pile.

It's the usual stupidity, where those who don't need to borrow are inundated with offers and those who desperately need to borrow are refused any.

And as usual, it is better to borrow £100 million rather than just £100,000 - based on the age old addage that if you owe your bank £100,000 you are worried but if you owe your bank £100 million, they are worried!

So is the (tongue-in-cheek) advice supposed to be to borrow as much as you can beyond your means so that you can sleep at night and the banker will stay up all night worrying?

Right now it appears to me that it is the government who are staying up all night and worrying.

Or am I just a cynic?

I feel like a man who has been watching a two part crime series, one of those where we see the crime being committed in part 1 and the star, usually a DCI, has to prove the perpetrator guilty in part 2. However in this case I appear to be the only person to have seen part 1 and know who committed the crime. In part 2 we see the wrong person being found guilty and having to pay the price for the perpetrators crime. I find myself shouting at the television at the injustice as the innocent party is lead away to serve a long prison sentence whilst the guilty party goes unnoticed and thrives in society.

When will the Government and the general public wake up to the fact that we are being wrongly punished for the greatest crime so far perpetrated in the 21st century. A crime which has been has been committed in broad daylight and yet we, the general public, accept the punishment for the crime and allow the perpetrators to walk free and even go on to earn extravagant bonuses. What type of society are we living in! Yes I am talking about the banks. The banks which have systematically sucked dry our government resources on the grounds that they are “to big to fail” and now operate in a fairy tale world where their balance sheets, propped up by our hard earned cash, allow them the opportunity of earning vast amounts of money for their shareholders and bonuses for their staff despite their previous failings which have brought governments throughout the world to their knees.

I have great admiration for those Governments who undertook to support the banks since they were fully aware of the impact bank failures would have on the whole of society. However the continuing quantitative easing appears to be only propping up the balance sheets of our banking institutions. We are all aware of the stringent credit controls now being imposed by the very banks we have taken from the brink of disaster?

I spoke recently to a bank manager, a bank now in government ownership, who explained that his bank were being encourage by Government to increase its lending to businesses in his area but due to the eagerness of those businesses to pay off their overdrafts the official statistics had shown his area was lending very little money. I explained that I found this somewhat astounding that in the era of the lowest interest rates in recent history, businesses should be reducing their overdrafts which could be detrimental to their cash flows. Further research of the businesses in the area proved something of a different picture. I found that businesses where reducing their overdrafts not because they want to but because their banks were forcing them to do so. I came across numerous instances of businesses being told to reduce their overdraft and in certain cases having their overdrafts withdrawn. Where do these statistics figure in the Governments encouragement to increase bank lending?

When will the Government wake up to what is really happening. The country having come to the rescue of the banks is now being starved of cash by the same banks that are now hoarding the cash made available by the Treasury. We as taxpayers are now finding not only do we have to look forward to higher taxes but major cuts in our public services all because the banks got greedy, the very banks who are now enjoying excessive profits and paying extravagant bonuses to the very staff that caused the problem.

Well what is the answer? As any business man is all too aware that if they borrow money from a bank they are obliged to ensure that that money is returned with interest and if that business should be the cause of additional financial hardship to the bank then the business will be asked to make recompense for that financial hardship. Why should those rules not apply to our banks? It can be clearly proved that they are behind our current financial problems and in some cases still continue to drain the financial coffers of some countries. Governments should insist that the banks fully recompense them for their failure to apply competent financial control. BP now finds itself having to pick up the tab for the disastrous oil spill in the Gulf of Mexico so why should we not apply the same logic to the banks.

Why should banks have cash available to pay outrageous bonuses, estimated to be some £7 billion in 2010? Surely Governments should now introduce legislation to ensure that this money goes to pay off the debts injected by the banks on society? It would of course be necessary for such legislation to be on a global scale, since we have already been told by the banks that if any country imposes draconian legislation they will move their head offices to other territories which offer more favourable conditions. Yes they want to cut and run from the problem. The Government’s spending review will be announced in the next two weeks following which many people will lose their jobs, services will be cut and for a generation we will be paying off a debt brought on by the banks the very banks who will, towards the end of 2010, be announcing bonuses to the staff who’s actions helped to get us into this economic mess.

Richard O’Brien

richard1313@fsmail.net