Britain’s banks are fulfilling their Darwinian role, to survive, rather than their economic one, to lend, and there is no easy or painless way out.
A glance at the latest Bank of England Credit Conditions Survey makes grim reading, with yet another marked tightening of lending conditions to households and businesses. Loans are harder to get and more expensive where available, which is hardly surprising given rising defaults and a hardening view that the UK will suffer a long and deep recession.
Mortgage approvals are running at a record low and there are widespread, though anecdotal, complaints of otherwise healthy small and medium sized businesses being squeezed to the point of failure by lack of finance.
On the face of it, Britain’s injection of 37 billion pounds of capital into three major banks and its guarantee of a further 250 billion pounds of interbank lending are not having the desired effects.