Abacus Daily Debt News

Banks ‘to offer too little lending’

The main problem with banks over the next couple of years will not be unwise lending, not enough, an economist has predicted.

UK economist at French bank BNP Paribas Alan Clarke commented: "I don't think there is any danger of reckless lending over the next couple of years.

"In fact I think it will be the opposite; that there will be too little."

Such a situation could help avoid a scenario where people get into worse debt than they face now, but it may also make debt consolidation loans harder to come by.

Mr Clarke said one reason for subdued lending was the lack of revenue banks could get from mortgages because of the low base rate, while they are also seeking to adjust to the fact they will not have the Bank of England's Special Liquidity Scheme after 2012.

The facility was launched in 2008 to offer a chance for banks to increase their liquidity by swapping quality securities for Treasury bonds, after the market for some kinds of securities was closed by the credit crunch.

By Amy White