Banks Accused of Hoarding Credit and Refusing Loans

Fri, 04 Sep 2009

New figures from the Bank of England have revealed a record fall of £8.4 billion in the amount lent to businesses by banks in July. It is the single largest monthly fall since records began twelve years ago, and represents a 1.7 per cent slump on the previous month’s lending. Banks have been accused of hoarding credit in light of the figures, though banks have been quick to insist that they remain willing to lend, but businesses are preferring to repay debts to shore up their balance sheets rather than to seek further loans .

The surge in toxic debts in recent years has doubtless contributed to the decrease in lending, with banks eager to build up a capital reserve to ensure they are better equipped to deal with a similar crisis in future. The figures from the Bank of England revealed a 40 per cent increase in conventional corporate debt in the second quarter, whilst write-offs on unsecured lending rose by £250 million over the same period.

It is not only businesses which have found it difficult to obtain loans, with consumers finding personal loans hard to come by in recent months, unless accompanied by an exorbitant interest rate . This is particularly true of home loans, with an unprecedented level of lenders demanding chunky deposits.
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