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Banks start to lend again

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Reported in Sharecast this morning is the news that the number of banks expecting to make more credit available over the next three months outnumbers those predicting a fall.

"The economic outlook was no longer expected to be a factor bearing down on credit availability," the bank announced.

"Improvements in the cost and availability of funds were expected to support increased credit availability over the next three months."

One caveat, reports the BBC, is that lending criteria to businesses are being squeezed, "with loan covenants being tightened by more than expected, while maximum credit lines had fallen and collateral requirements had increased slightly, with further tightening anticipated in the future."

Combined with news from Nationwide that house prices rose by 0.9 per cent last month and reports of near-consensus at G20, then there’s just a hint that it might be time to come away from behind the sofa.

Earlier this week, I spoke to one senior banker at a non state-owned bank (there aren’t that many) who confirmed that the nationalised banks were starting to "throw debt around" again. He also pointed out that the banking sector was already lopsided in favour of the state banks. "If a business is struggling and it’s got, say £100m debt in it, most of it with the nationalised banks," he explained. "They can put their debt into the government’s toxic asset schemes. We can’t." In the future, he said, this could create new lot of problems in the banking system.

Now I appreciate that senior bankers are about as likely to gain sympathy as Josef Fritzl, but he does have a point. We may be on the verge of flushing out the system and scraping our economies off the bottom, but any recovery will be beset with its own set of problems.

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