–UK Banks Don’t Have Same Problems Faced By Some EZ Banks
–Denies Reports Of Rift With BOE King Over Credit Easing
–Sees Plan On Credit Easing Set Out By End Of November
LONDON (MNI) – UK Chancellor of the Exchequer George Osborne has
explained away the Moody’s downgrade of 12 of the UK’s banks as an
inevitable result of the government backing away from its implicit
gbuarantee for the banking sector.
“I’m confident that British banks are well-capitalised, liquid, are
not experiencing the kinds of problems that some of the banks in the
euro zone are experiencing at the moment,” Osborne said.
“The reasons they’re doing this is because they think that the
British government is actually moving in the direction of trying to get
away from guaranteeing all the largest banks in Britain, in other words
trying to deal with the too big to fail problem,” he added.
The comments followed a report in the Financial Times today that
the government feared it may have to undertake a second bailout of
state-owned bank RBS, although this has been played down by City
In an interview with the BBC’s today programme, Osborne said that
he welcomed the Bank of England’s decision to engage in another round of
asset purchases, but reiterated that the government was looking at
credit easing measures to further improve credit availability for small
“Mervyn King is right that the tool that he can use, or rather his
Monetary Policy Committee can use, rather QE, is in a way the purist
form of monetary action in this space. Whereas it is up to the
government of this day to channel money to particular parts of the
economy,” he said.
The chancellor denied reports of a rift between himself and BOE
Governor Mervyn King, with King refusing to involve the central bank in
policies aimed at channeling money and credit to particularly troubled
sectors of the economy. He and the governor had ‘put a lot of effort’
into establishing a good working relationship, he said.
Osborne said that the Treasury would come up with a plan for credit
easing by the end of November. Buying corporate bonds, securitised
packages of SME loans and underwriting loans for businesses were all
options that could be considered.
The UK, he explained, only had a small and thin corporate bond
market, limiting the scope for the kind of action here which has been
undertaken by the U.S. Treasury and the Federal Reserve. In the
short-term, Osborne said that the credit easing policy would have to
rely on banks to filter money through to firms.
“You can either buy up corporate debt, corporate bonds that’s an
elaborate way of saying that the money that small businesses and
medium-sized businesses borrow outside of banks instead of just going to
there local bank, or you buy up packages of small business loans, or you
can underwrite lending from banks to small businesses,” he added.
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