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Bank Of England Offers Loans To Spark Economy
UK bank stocks
risen strongly after the Bank
England pledged to offer
new, low-cost loans to encourage lending
Britain's shrinking economy.
a speech in the City of London last night, the bank's governor Sir Mervyn King blamed
eurozone crisis for "exceptional circumstances"
which banks are struggling to borrow
affordable rates from international markets.
Sir Mervyn said: "It would complement the Government's existing schemes, and tackle
high level of funding costs directly. "It could,
hope, be
place within a few weeks."
response, shares in part-nationalised Royal Bank of Scotland and Lloyds banking Group were the
biggest risers on the FTSE 100
early trading - up six and 4 per cent respectively. Barclays' share price
rose 3%.
But there was some scepticism.
Banking commentator Iain Anderson told Sky News: "Given the stresses in
system
the moment, this is going
have to be a very significant package to
a difference.
"We're going to have to see
detail, we're going to have to
the numbers before we can work
if it can make a difference."
The shadow Chancellor Ed Balls argued the bank and
Treasury could not use the eurozone crisis
an excuse for the shift
policy.
He told Sky News it
an admission that the UK economy's recovery had
damaged by the coalition's lack of action to secure growth.
In his speech, the Chancellor also outlined
Government's proposals to prevent future banking crises and protect depositors' and taxpayers' money in the
of a banking collapse.
George Osborne told City grandees in
Mansion House speech: "I believe that we have found a workable way
solve
I called the 'British dilemma' - protecting British taxpayers in a
that does not make the UK uncompetitive as
home of global banks."
New reforms to banking regulation, based
the recommendations of the Independent Commission
Banking,
splitting high street and investment banks to ensure ordinary savers' money is protected
risky investments going wrong.
Banks will also be
to hold cash reserves worth 17%
the value of their business to help them
trading in the event
a bank funding crisis
as that which led to the collapse of Northern Rock in 2008.
But British banks will not have to hold extra reserves on
of subsidiaries outside
European Economic Area provided their UK businesses are not affected
the collapse of those subsidiaries.
The banking industry has resisted the reforms arguing they will push
the cost of
business and that higher costs will have to be passed
to customers who have grown accustomed
free banking services.
Kevin Burrowes, UK financial services leader at PwC said: "We all want
stable, highly competitive, customer focused UK banking sector.
"The very heavy burden of all this regulation and the management effort required
address it could potentially
our banks uncompetitive globally.
"The rapidly growing financial institutions
emerging markets will seek
exploit the opportunities this gives them."
Adapted from: Sky News, June 15, 2012.
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