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Borrowing options reduced by Banks

The reluctance of many Banks to offer borrowing options, or to even continue with currently agreed arrangements, is causing a backlash and the Government may be forced to step in with new regulations.

When the chips were down for many Banks in the UK the Government stepped in to take over some of those organisations in part and also to extend the role of the Bank of England in offering more flexible loan arrangements. All this action ensured the survival of most lending organisations, but the very situation that these measures were designed to prevent still seems to be happening.

Without operative credit markets that allow businesses to borrow cash, to either expand or merely survive in some cases, the very basis of our economy could start to falter. That is why the Governemnt feared that the drying up of credit markets could force the UK quickly into a recession situation. So they quickly increased funds to improve liquidity in credit markets and even used their own reserves and loans to rescue two of the biggest Banks from failure. But despite all this help the Banks still seem to be very reluctant to make some of their new found cash available to borrowers. People looking for personal loans and businesses that rely on lending to remain in operation are finding that Banks simply will not lend them the money they need. Prefering to keep their cash to themselves until the financial outlook improves could be making the likelihood of that improvement even more distant.

As well as refusing new borrowing, many banks are calling in loans they have already made, reducing overdraft limits and causing immense hardship for the people and businesses that need their facilities.

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