Banks set to lend more than ever to UK consumers

According to the BBC’s Business Editor Robert Peston (who broke the story on Northern Rock), UK banks could end up lending us more than they did during the boom times. On the face of it this seems crazy, but if you read Robert Peston’s blog dated 4th January 2009, he gives good eceonomic reasons why this may become a necessity, as well as a reality, in 2009.

A taxpayers insurance scheme for banks, according to Robert Peston’s article on the BBC News website on 4th Jamuary is under serious consideration. His article asks “Why would this encourage banks to lend more than they are doing at present?” and then goes on to give the two following very good reasons:

“First, the banks could take a bit more risk when lending, because the loss to them in the unlikely case that all the stinky stuff hit the fan at the same time would be knowable and manageable.” and

“Second, with the state sharing the risk, the banks’ capital ratios would look much healthier as their balance sheets expanded, because the formal regulatory risk-weighting of lending would be significantly reduced.”

Global financial markets all appear to be looking to shore up their home front, and therefore UK Banks are more likely to re-direct any loans they are prepared to make to the UK market where their money is going to be safest. It looks us British taxpayers who are going to guarantee the banks money, to give them enough confidence to lend us money to help regenerate the UK economy! Ironic huh!