Bankers and ministers chew over lending at Chequers lunch

by Gill Montia

Story link: Bankers and ministers chew over lending at Chequers lunch

Prime Minister Gordon Brown met with some of the UK’s leading bankers yesterday, over lunch at Chequers.

According to a report in The Sunday Times, the guest list included Barclays’ chairman Marcus Agius, Standard Chartered chairman, Mervyn Davies, Lloyds TSB chief executive, Eric Daniels, and the chairman of the London Stock Exchange, Chris Gibson-Smith.

Chancellor of the Exchequer, Alistair Darling, and Financial Services Secretary, Lord Myners, were also in attendance.

The agenda will have been dominated by the issue of lending and a new scheme being developed by the Treasury to kick-start the economy.

The Bank of England’s credit conditions survey, published earlier this month, revealed that major lenders tightened credit availability significantly during final quarter of 2008.

The report also warned that lending would remain restricted during the first quarter of 2009, raising fears of a vicious cycle in which the downturn in the economy would be fuelled by defaults arising from a shortage of credit for businesses and individuals.

The findings of the survey are alarming, given that October’s bank bail-out was backed by £500 billion of Government money in the form of cash injections for recapitalisation, loans provided under the Special Liquidity Scheme and guarantees.

Analysts expect the Treasury to provide new guarantees for banks and other businesses in the weeks ahead.

Ministers could also answer calls to fully implement the recommendations of the Crosby Review on the UK mortgage market, which recommends Government-backed guarantees for mortgage bonds worth billions of pounds.

Another strategy reported to be under consideration involves buying up toxic assets and creating a bank for bad debt, as has been done in the US.