As a result, the U.K. government is signaling it might have to introduce further measures to encourage or even compel banks to boost lending to business, as the authorities raised the specter of full nationalization.
Reports suggest Chancellor of the Exchequer Alistair Darling wants regulation that would force banks to give companies more notice of any change in lending practices. He is also said to be considering extending government guarantees to support new business lending and possibly also credit insurance or further bank recapitalization.
A Treasury spokesperson on Wednesday described the reports as "speculation," adding: "As the Chancellor has said, we are closely monitoring the commitments made by banks to support new business lending and ensure customers are treated fairly and decently. Through the new lending panel, announced in the Pre- Budget Report [on Monday], the government will work closely with lenders, consumer groups and regulators to monitor lending levels and practices by banks, and ensure their commitments are met." - Neil Sen
British banks are remaining cautious, keeping lending to a minimum and worrying the U.K. government.
