Call for UK Banks to End Lending Drought; Nationalisations Possible IN ASSOCIATION WITH Rensburg Sheppards Investment Management
Byline: BY HOLLY WILLIAMS Daily Post Correspondent
BANK of England Governor Mervyn King warned that the lending drought for consumers and businesses posed the single biggest threat to the UK economy.
Mr King gave support to the Government's fiscal stimulus package announced yesterday, but said it was now of "over-riding importance" to get banks lending again.
He signalled more interest rate cuts and potential further banking bail-outs, and refused to rule out more nationalisations in the battle to kick-start the ailing economy.
He told the Treasury Select Committee: "The single most pressing challenge to domestic economic policy is to get the bank system to resume lending in any normal sense."
He added: "We don't have adequate monitoring of lending.
In the past month, lending to businesses and to households has been extremely weak. That's a real source of concern."
The Governor cautioned that a continued lending clampdown posed a real risk of deflation.
Mr King and fellow Monetary Policy Committee members refused to be drawn on future interest rate decisions after yesterday's Pre-Budget report, but he said they would have to take into account the failure of banks to pass on rate reductions in full. …