Raw Japan

from MacroScope:

Vision of the future? See Japan’s past

Jeremy Gaunt

Aug 5, 2009 14:22 UTC

MacroScope is pleased to post the following from guest blogger Ian Bright. Bright is senior economist at ING and winner of the 2008 Rybczynski Prize from the UK Society of Business Economists. He says here that bank lending's future can be seen in Japan's past -- and it is not good for the would-be borrower. 

"There is anger in many countries that banks are not lending money. Or more correctly, they are lending less than people want.

There is nothing new in this. Even before the failure of Lehman Brothers and the collapse of the global financial system, banks were tightening lending criteria. We even saw people who paid off their credit cards each month have them withdrawn. Small companies found that the criteria used to value the assets backing loans were made more onerous.

When the financial system virtually collapsed, governments provided money and central banks lowered rates. Many thought that this would increase the ability to get loans from banks. Indeed some governments made efforts to link the provision of public money to increased loans to particular groups, such as small businesses and homeowners.

Asia banks eye gaps on the Western front

Mike Smith, the chief executive of Australia and New Zealand Banking Group Ltd, is looking to fill some gaps.

As global banks such as Royal Bank of Scotland Plc and Citigroup Inc reel from losses on toxic investments and take massive government bailouts, Smith reckons he may be able to steal some business in Asia.