Banks 'recklessly cautious'

Last Modified: 01 Dec 2008
By: Faisal Islam

In an interview with this programme, Lord Myners says banks will be more heavily regulated in future.

The city minister has accused Britain's banks of being "recklessly cautious" in the midst of recession.

Lord Myners also said that the terms on which some banks are receiving taxpayers' money may be relaxed.

"Nobody is saying that banks should lend money recklessly, but what we are saying, there is such a thing as 'reckless caution'.

"There is a situation in which banks become so fearful of lending that they reduce credit, and undermine the quality of their loan book."

Lord Myners added: "So we've gone perversely from a situation where some would argue that banks were reckless in not correctly measuring risk, and pricing risk and accordingly, took on more risk at a lower reward than they should have done, to a risk now, that they're going in the other direction."

His comments coincide with a decision by state-owned RBS to give struggling homeowners at least six months' grace before repossessing their properties.

And new figures from the Bank of England have shown that mortgage lending dropped by 70 per cent in October.